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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH
Before: Shri Waseem Ahmed & Shri T.R. Senthil Kumar
PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the assessee as against the order dated 21-02-2009 passed by the Principal Commissioner of Income Tax – 3, Ahmedabad [herein after referred as PCIT] under section 263 of the Income Tax Act, 1961 [hereinafter referred as the Act] relating to the assessment year 2009 –10. 2. Brief facts of the case is that the assessee is a Partnership firm engaged in agricultural activities and deriving only agricultural
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income which was claimed as exempt under section 10[2A] of the Act. For the assessment year 2009-10 the assessee filed its Return of Income on 31.07.2009 declaring total income of Rs. Nil and agricultural income of Rs.7,83,72,835/-. The Return was processed under section 143[1] on 27-09-2010. Thereafter the case was selected for scrutiny assessment, notices under section 143[2] and 142[1] were issued and various details called for and the assessee was asked to explain its exact nature of agricultural income and justification for claiming it as exempt being income derived from agricultural operations. In compliance thereof the assessee submitted that they have got agricultural land of 49.82 bighas in Kamode village, Dascroi Taluk, wherein Teak plants, Sevan trees were planted 8/10 years ago. All the basic operations necessary for the purpose of effectively pricing the produce from the land are carried out under the personal supervision of the partners. They have their own borewell facilities and essential equipment, infra structure. Necessary integrated activity which constitutes agriculture is undertaken and performed in regard to the land and agricultural produce namely the Teak trees and Sevan plants were sold and disclosed in the return of income. Thus the assessee claimed the income derived therefrom shown as ‘agricultural income’. After verification of the records and a perusal of ledger account of agricultural income, copies of sales invoices, bills, vouchers related to purchases, copies of salary, bonus account, bank statements, etc and the Assessing Officer satisfied that the plants owned by the assessee are the result of my primary as well as subsequent operations carried for the product of agriculture,
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therefore the claim of the assessee was accepted and passed detailed assessment order dated 08-12-2011 u/s. 143(3) of the Act.
Subsequently this assessment was reopened by issuing a notice under section 148 dated 7.2.2014 on the ground that the assessee failed to disclose fully and truly all material facts namely evidences leading to agricultural operations carried out by the Partners at the agricultural land by engaging themselves or allowing others to carry out the agricultural income on barter system, evidences in the form of incurring necessary expenses such as watering, security, cutting and felling down the trees and bringing them to the marketplace for sale, loading and unloading expenses, etc and also receiving the sale proceeds from the genuine sale of teak woods. To this extent the income chargeable to tax has escaped assessment for the assessment year 2009-10 within the meaning of section 147 of the act.
The assessee objected the reopening of assessment and however submitted various details on the agricultural income derived from sale of Teak trees, Sevan trees and copy of sale register, sales invoices containing terms and conditions subject to which sale transactions are executed along with copy of challan of Tax Collected at Source (TCS) paid on sale of Teak trees, Sevan trees. Thus the assessee claimed that cultivation of teak trees and sevan trees from the year 1994-95 as agricultural income and properly maintaining books of accounts and strictly following the guidance issued by the Forest department. The assessee also filed a detailed reply letter dated 30-01-2019 which is running to 18 pages
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explaining the nature of agricultural activity based on this enquiry the original assessment order under section 143[3] made on 08.12.2011 accepting the agricultural income of Rs.7,83,72,525/=. When the assessment was reopened u/s.148 on the ground that the assessee failed to disclose fully and truly all material facts, the assessee filed a detailed reply by producing various details and evidences in support of the cultivation of Teak trees and Sevan trees.
Thus the Assessing Officer vide his letter dated 25-08-2014 disposed of the objections raised by the assessee on reopening of assessment and passed detailed order upholding the reopening of assessment under section 147 is valid in law. The AO after considering the above explanations, evidences, other materials on records and satisfied that the cultivation of Teak trees and Sevan trees and claim of agricultural income by the assessee firm. Thus the AO accepted the income derived from agricultural lands and sale of Teak trees and Sevan trees, however the claim of expenditure incurred by the assessee namely Rs.5,75,975/- which comes to nearly 0.73% on the sales thus showing total gross income of Rs.7,83,72,525/- which comes to a net worthy 99.27% of total sales which was not acceptable. But the Ld. CIT [Appeals] in Assessee’s own case for the assessment year 2013-14 adopted at 5% on the gross agricultural income as reasonable expenditure, the AO following the above ratio of expenditure for the present assessment year and making a disallowance of Rs.37,22,695/- as unexplained expenses under section 69C of the Act vide reassessment order dated 18-08-2017. I.T.A No. 695/Ahd/2019 A.Y. 2009-10 Page No 5 M/s. Greenwell Orchards vs. Pr.CIT
As against this the reassessment order the Ld PCIT issued a show cause notice dated 21-01-2019 on the ground that the reassessment order passed by the assessing officer is without conducting suitable, independent inquiries and non-application of mind by the AO, thus it is an erroneous order and prejudicial to the interest of Revenue. Therefore the assessee was requested to show cause as to why the reassessment order should not be set aside under section 263 of the Act, thereby directing a fresh assessment so as to ascertain whether claim of agricultural income of the assessee firm is genuine or not.
The assessee challenged the invocation of 263 proceedings is bad in law on two folds namely
[a] Revision proceedings could not have been invoked in this case, since the source of agricultural income was examined thoroughly by the assessing officer and made addition of 5% of gross agricultural income which was the subject matter of appeal before CIT [Appeals], and the CIT [Appeals] has confirmed the above addition but accepted the source of Agricultural income from sale of Teak and Sevan Trees. Thus the reassessment order got merged with the order of the Appellate Authority, when the issue is decided by the CIT [Appeals], therefore as per section 263[1][c], Ld PCIT does not have power to revise such cases and [b] Revision is proposed u/s.263[1][b] for the reason that AO has not conducted proper enquiry which is not applicable to the present case since the explanation was inserted by the Finance Act
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2015 with effect from 01-04-2016, whereas the assessment year involved herein is 2009-10. Thus the Ld PCIT does not have power to Revise the reassessment order on the ground that the AO has not conducted proper enquiry.
After considering the above reply, the Ld PCIT by this impugned order dated 21.02.2019 set aside the reassessment order passed by the AO invoking explanation 2[a] & 2[b] of section 263[1] of the Act and directed the assessing officer to pass fresh assessment order, after properly ascertaining the genuineness of agricultural income and also after gathering, examining other suitable evidence/making field inquiries and verification, after affording opportunity to the assessee.
Aggrieved against this Revision order, the assessee is in appeal before us. Learned Senior Advocate Shri S.N. Soparkar appearing for the assessee has taken as through the Paper Book filed by the assessee more particularly pages 27 to 67 which is a reply letter dated 17.10.2011 to the notice issued under section 142[1] by the assessing officer, during the original assessment proceedings wherein the assessee filed the documents namely ledger account of agricultural income, copies of 7/12 & 8A records for proof of agricultural land, copies of sales invoices, salary and bonus account, details of other source of income [there is no other source of income], details of bank accounts, utilisation of agricultural funds, etc. Thus during the original assessment proceedings all the details were produced by the assessee and the AO accepted the agricultural income shown by the assessee. When the assessment
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was reopened u/s.148 and in reply to the show cause notice issued u/s.142[1] dated 09.08.2017 wherein the assessee filed detailed reply with evidences before the A.O. The Ld. Senior Counsel taken as through the Paper Book at pages 115 to 178. 10. 1. The assessee submitted various details on the agricultural income derived from sale of Teak trees, Sevan trees and copy of sale register, sales invoices containing terms and conditions subject to which sale transactions are executed along with copy of challan of Tax Collected at Source (TCS) paid on sale of Teak trees, Sevan trees were standing on land bearing block number 41 at Komad and the same has been sold during the year as Annexure-1. No objection letter dated 18.09.1995 issued by Deputy Conservator of Forest department approving the assessee to carry out plantation of Teak trees in private land at as assessee’s own expenditure as Annexure-2. It is only after taking admission of the Forest Department the assessee firm initiated agricultural productivity of cultivating Teak trees and Sevan trees since 1995. The assessee submitted copy of old 7/12 forms of survey no. 80 paiki at Piplaj and survey number 10, 41 at Kamod clearly showing therein that Teak trees and Sevan trees have been cultivated on the said land vide Annexure-3. Confirmation from Kamod Gram Panchayat that Raghuvir Prasad Agarwal has cultivated Sevan trees on the land at Kamod as Annexure-4. Copy of Panchnamu from Talati, Kamod duly confirming that on agricultural land bearing block no. 41/A wherein Teak trees/Sevan trees have been cultivated since last 20 years and even as on today existing in the said land as Annexure-5. Details of expenses incurred in the earlier years for I.T.A No. 695/Ahd/2019 A.Y. 2009-10 Page No 8 M/s. Greenwell Orchards vs. Pr.CIT
cultivation of Teak trees/Sevan trees vide Annexure-6. Copy of the Bank statements, ledger account of the assessee from the books of accounts of the parties to whom Teak trees and Sevan trees have been sold as Annexure 7 and 8. Agreement with the Torrent Power Grid Ltd to cut the Teak trees for transmission line which pass through the assessee’s land as Annexure-9. 10. 2. Thus, the ld. Senior Counsel submitted that all relevant details with appropriate records were produced by the assessee before the Assessing Officer during the reopening of assessment proceedings. Therefore, the ld. PCIT is not correct in invoking Section 263 (1)(b) & (c) of the Act on the reason that the Assessing Officer has not made proper enquiry before allowing relief to the assessee. The ld. Counsel also submitted that the above Explanation 2 to 263 was being inserted by the Finance Act, 2015 with effect from 01.06.2015 only and whereas the assessment year involved herein is 2009-10 and therefore this explanation is not applicable to the present case.
In support of its claim, the Ld. Senior Counsel Mr. S.N. Soparkar relied upon the Hon’ble Supreme Court Judgment in the case of Principal Commissioner of Income-tax, Surat vs. Shreeji Prints (P.) Ltd. reported in [2021] 130 taxmann.com 294 (SC) wherein the SLP filed by the Revenue was dismissed as follows:
Section 69 read with section of the Income-tax Act, 1961 - Unexplained investments (Unsecured loans) - Asst year 2013-14 - Assessee-company had received unsecured loans from two different companies - Commissioner noting that said loans were shown as investment in I.T.A No. 695/Ahd/2019 A.Y. 2009-10 Page No 9 M/s. Greenwell Orchards vs. Pr.CIT
assessee's name in balance sheet of companies, exercised his revisionary powers and passed an order without giving an opportunity to of being heard, invoking Explanation 2 to section 263 - High court by impugned order held that since Assessing Officer has made inquires in details and accepted genuineness of loans received by such view of Assessing Officer was a plausible view and same cannot to be considered erroneous or prejudicial! to interest of revenue - Whether SLP against said impugned order to be - Held, yes [Para 2] [In favour of assessee]
Further Reliance is also placed on the juri ictional High Court judgment in the case of Commissioner of Income Tax vs. Kamal Galani reported in [2018] 95 taxmann.com 261 (Guj.) wherein the Hon’ble High Court held as follows:
In this context, we may recall, the Assessing Officer had examined two issues. With respect to introduction of the capital, the assessee had pointed out that he was an NRI for over two years and he had made foreign remittances over a period of time. With respect to the unsecured loan of Rs. 3.87 crores received from his brother also, the assessee had provided' necessary details which were called upon by the Assessing Officer. We have reproduced some of the responses of the assessee only to highlight the nature of inquiries carried out by the Assessing Officer and the detailed answers given by the assessee. With respect to his brother, the assessee pointed out that he was running a successful business of trading, was engaged in various commercial and non-commercial activities. He was man of standing and means. In fact, the Commissioner has gone on record to suggest that he neither disputes the identity nor the creditworthiness of the brother of assessee to loan such amount.
The Assessing Officer having carried out such detailed inquiries, it was not open for the Commissioner to thereafter reopen the issues on mere apprehension and surmises. His two fundamental objections were that the Assessing Officer did not verify whether the remittances were from the own income or sources of the assessee and his brother or were merely by way of hawala transactions. In the process, he was also critical of the Assessing Officer not insisting on collecting the details of the accounts from which the foreign remittances were made to the Indian account of the said
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two persons. Without any material without any basis, the CIT could not have remanded the proceedings to the Assessing Officer to cany out further inquiries in order to ascertain whether the remittances were genuine or were in the nature of hawala transactions. In the entire order of the Commissioner, we do not find any basis for him to carry such apprehension. His principle thrust was to the effect that assessee did not produce the precise bank details of the foreign remittances even before him. There is nothing on the record to suggest that he called upon the assessee to do so \ and the assessee failed or refused to do so.
Thus, the Ld. Senior Counsel submitted that during the original assessment proceedings u/s. 143(3) detailed enquiry had been made by the Assessing Officer and having satisfied after verification of records, the claim of agricultural income was accepted by the AO. Thereafter when the reopening of assessment was initiated on the ground that there is failure on the part of the assesse in disclosing true and full information to the department, again the assessee submitted details called for in support of its claim of agricultural income. The AO having satisfied the generation of income from agricultural activities, however made an addition u/s. 69A namely 5% of gross sales of the agricultural product as an expected expenditure ought to have been incurred by the assessee. Thus, the Ld. PCIT is totally without juri iction has invoked the present revision proceedings which is not justifiable in the eye of law.
The Ld. Senior Counsel Mr. S.N. Soparkar further submitted that the reassessment proceedings was a subject matter of appeal before the Ld. CIT(A)-3, Ahmedabad and vide his order dated 18.07.2017 has dealt with the issue of agricultural income in very
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detailed manner. As per Explanation 1(c) of Section 263 when a subject matter has been considered and decided by Ld. CIT(A), the same subject matter cannot be reopened u/s. 263 by the PCIT. As it can be seen from the Ld. CIT(A)’s order, the issue of income generated from agricultural activity was considered and decided by the ld. CIT(A) and brought our attention to relevant findings as follows:
On careful consideration of facts, it is undisputed facts that appellant firm has cultivated plantation of teak tree in year 1995 and part of such trees are sold in year under consideration and was having age around 20 years. The appellant firm has not made any new cultivation of such teak trees in current year. The A.O. has not disputed the agriculture income shown by appellant but only dispute is with regards to agriculture expenditure because AO is of the view that 20% of agriculture income need to have been utilized for incurring agriculture expenditure for maintenance and preservation of such teak tree whereas appellant has claimed to have incurred expenditure of Rs. 1,41,250/-. Before dealing with observation of A.O. and submission of appellant, it is observed that appellant has claimed out plantation of teak trees/sevan trees way back in 1995 and such plantation require more care in initial years and such plantation is total different from year to year production of wheat, rice or any other agriculture commodity. For carrying out agriculture activity of such normal agriculture produce person involved in such activity has to take care for usage of seeds, pesticides, insecticides, weeping, pruning, soil maintenance etc on yearly basis whereas once teak plantation is carried out, persons involving such activity has to incur expenditure at initial years and once plants grow in two to three years, they automatically can grow even with rain water and no huge expenditure is required to be incurred like other agriculture activity as stated herein above. It is observed that while estimating agriculture expenditure @ 20% of agriculture income, the AO has not given any comparative evidences and on the contrary he at page 5 of the assessment order himself stated that teakwood plantation no doubt needs maximum care at the initial stage as claimed by assessee. It is also observed that appellant has I.T.A No. 695/Ahd/2019 A.Y. 2009-10 Page No 12 M/s. Greenwell Orchards vs. Pr.CIT
incurred expenditure of Rs. 26.51 lacs in A.Y. 1995-96, 21.37 lacs in A.Y. 1996-97, Rs. 11.84 lacs in A.Y. 1997-98, 13.97 lacs in A.Y. 1998-99 etc. which also suggest that teak plantation require due care and expenses at initial years. The A.O. has observed that appellant has not maintained stock register or details of opening and closing stock and stand taken by the appellant that sales are of standing trees is specious cannot be accepted because A.O. has not disputed agriculture sales shown by appellant in year under consideration and even he has called for information u/s. 133(6) from buyers of such trees and such parties have duly confirmed such transactions. It is also observed that A.O. has deputed tax inspector who has given his report vide letter dated 23/03/2016 wherein he has stated that there are fields of teak plantation and his inquiry nowhere reveal that there were no standing teak trees hence such observation made by A.O. is incorrect.
It is observed that while estimating agriculture expenses @ 20%, the AO has stated that buyer of the trees have shown very low expenditure for cutting of trees and doubted the method of transpirations. It is observed that during the course of assessment proceedings appellant has submitted copy of sale bills raised by it wherein it has been clearly stated that responsibility of cutting the trees are on buyers and such facts are admitted buyers in notice issued u/s. 133(6) of the Act. If the buyers have not shown any reasonable expenditure for cutting of trees same no way lead to conclusion that appellant has incurred unexplained expenditure. The A.O. has also referred to photographs furnished by appellant during the course of assessment proceedings and contended that numbers of workers and involved in pruning and cutting of trees and no reasonable expenditure is claimed by appellant. It is observed that appellant has submitted photographs to prove that cutting of trees were made and in fact standing trees were sold. Even such photographs were at the time of cutting of trees and entire responsibility of cutting of trees was on buyers of trees and workers were carrying cut work on behalf of buyer and not on appellant. …. ….. …. …. ….
Considering the facts discussed herein above, it is observed that AO has estimated agriculture expenses @ 20% of agriculture income of teak
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tree sale is on higher side and on estimate basis without bringing any corroborative evidences to support his view that appellant would have incurred expenditure of Rs.2,41,54,650/- for earning such income. Even web site referred by AO clearly suggests that such plantation is higher profitable. The AO has not stated that appellant would have incurred any further expenditure on irrigation etc. and teak tree once grow, can further grow with the help of normal monsoon water. On the other hand, appellant has claimed to have incurred expenditure of Rs. 2,49,938/- in current year which mainly includes salary expenditure of Rs. 1,41,250/- and such expenditure is very meager in comparison with plantations made by appellant. It is correct that teak tree plantation do not require much care or day to day maintenance like other agriculture produce but appellant has made extensive teak tree plantations at three different blocks wherein security expenses, and laborers expenditure for routine maintenance is bound to happen. The appellant has not shown any salary of administrative staff to maintain such activity. Even, appellant has not claimed any expenditure on pesticides and insecticides and as stated supra, such expenditure is bound to incur for any plantations. Normal weeding expenditure might have been incurred by appellant and same has to be confirmed on estimation basis. Considering the facts of entire case as discussed herein above and the dynamics involved in timber cultivation, it is held that appellant should have incurred expenditure to the extent of 5% of teak tree sale and same is worked out at Rs. 60,38,662/- and as appellant was unable to explain source of such expenditure. The same is considered to be adequate to meet ends of justice. Therefore, the addition made by A.O. is restricted to Rs. 60,38,662/- and appellant gets relief of Rs. 1,81,15,987/-. Thus, both the grounds of appeal are partly allowed.
In support the same, the ld. Senior Counsel referred to juri ictional High Court judgment in the case of Commissioner of Income Tax -Vs.- Nirma Chemicals Works (P.) Ltd. reported in [2009] 182 taxmann.com 183 (Guj.) wherein held as follows:
Thus, the Commissioner of Income-tax is entitled to revise an assessment order insofar as the order is erroneous and prejudicial to the interest of the revenue, but Explanation (c) places an embargo on the Commissioner of Income-tax in case of subject-
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matter of any appeal which has been considered and decided in such appeal. In other words, before the Commissioner of Income- tax exercises the juri iction under section 263 of the Act, the Commissioner of Income-tax is required to ascertain whether the order referred to in sub-section (1) of section 263 of the Act had been the subject-matter of any appeal, and if yes, the revisional powers shall be available only if such subject-matter had not been considered and decided in such appeal.
Further reliance is made on the Bombay High Court judgment in the case of Commissioner of Income Tax -Vs.- K. Sera Sera Productions Ltd. [2016] 71 taxmann.com 40 (Bombay) wherein it was held as follows:
“…. The assessee engaged in production and distribution of films had shown certain income from a film. Later it claimed that it was not income from production of film but sum received was share application money. The Assessing Officer did not accept the assessee's claim and considered said amount as income. He also did not accept the assessee's alternative claim of deduction of cost of production of film in terms of rule 9A and granted deductions to extent of sum debited to profit and loss account only. On appeal, the Commissioner (Appeals) deleted addition except certain amount. Later on, the Commissioner set aside the order of the Assessing Officer with a direction to inquire into issue. Held that the claim of cost of production of film was a subject matter of appeal before the Commissioner (Appeals) and after consideration of remand report of the Assessing Officer he gave his findings. Therefore, the order of the Assessing Officer undisputedly had merged with the order of the first appellate authority as far as the claim of cost of production of the film is concerned.
In the above factual circumstances, we do not find that the Tribunal erred in holding that clause (c) of the Explanation to sub section (1) of section 263 of the Income Tax Act, 1961 cannot be applied. In the present case, that has no application because the matters which have been considered and decided in the Appeal by the first appellate authority are being made subject matter of the revisional authority's order. In other words, the power to revise, as conferred by section 263, is sought to be exercised so as to deal with the same matters which have been considered and decided in the Appeal. We do not find any merit in Mr.
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Mohanty's submission because detailed references have been made in the foregoing paragraphs to the case of the Assessee before the Assessing Officer, his initial order, the order of the first appellate authority, the direction issued by the first appellate authority and which was given effect to by the Assessing Officer. All these would denote that something which was very much part and parcel of the appellate authority's order and dealt with extensively therein is now sought to be revised and revisited. Firstly, if the income of the Assessee from the film is Rs.11,25,00,000/-, then, whether the explanation of the Assessee that it is not so deserves to be considered or not by the Assessing Officer is grievance No. 1/ground No. 1 before the first appellate authority. Secondly, if that is taken to be the income of the Assessee and without admitting it to be so the cost of production of the film needs to be deducted by applying Rule 9A of the Income Tax Rules. Thus, that is ground No. 2 in the memo of Appeal before the first appellate authority and in his order dated 12th October, 2011. Both these matters are very much part of the revisional authority's order dated 29th March, 2012. The attempt to reopen them cannot be saved as clause (c) of Explanation below sub-section (1) of section 263 of the Income Tax Act, 1961 had no application.
Per contra, the ld. CIT D.R. Mr. A.P. Singh appearing for the Revenue supported the orders of the authorities below and pleaded the revision of assessment made by the Ld. PCIT u/s. 263 is valid in law and no interference is called for and therefore the assessee’s appeal is to be dismissed. The Ld DR relied on the judgement of the co-ordinate Pune Bench decision in the case of Ajanta Infrastructure Ltd -Vs- CIT in ITA No. 769 & 770/PUN/2015 dated 23-12-2021 wherein the invocation of Revision power u/s.263 was upheld by the Appellate Tribunal as the AO has done inadequate enquiry and passed the assessment order, which is clearly is an erroneous and prejudicial to the interest of Revenue.
We have given our thoughtful consideration and perused the materials available on record including the paper book and case laws field by the assessee. As has been rightly argued by the ld.
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Senior Counsel Mr. S.N. Soparkar and his first fold of argument, the Ld. PCIT invoking section 263 (1)(b) of the Act namely the A.O. has not conducted proper enquiry while passing the reassessment order. It is seen from the record, more particularly Paper Book at pages 115 to 178 in reply to the show cause notice issued u/s.142[1] dated 09.08.2017, the assessee produced before the Assessing Officer copy of the sale register, sales invoices containing terms and conditions subject to which sale transactions are executed along with the copy of Tax Collected at Source. On sale of Teak trees, Sevan trees which were standing in the agricultural land bearing block number 41 at Komad from which the trees were sold during the Assessment Year 2009-10. No objection letter dated 18.09.1995 issued by Deputy Conservator of Forest department approving the assessee to carry out plantation of Teak trees in private land at assessee’s own cost. Copy of old 7/12 forms, a survey no. 80 paid at Paiki at Piplaj and survey number 10, 41 at Kamod clearly showing therein that Teak trees and Sevan trees have been cultivated on the said land. Confirmation from Kamod Gram Panchayat that Raghuvir Prasad Agarwal has cultivated Sevan trees on the land at Kamod. Copy of Panchnamu from Talati, Kamod duly confirming that block no. 41/A wherein Teak trees and Sevan trees have been cultivated since last 20 years and the same are existing as on today. Copy of the expenses incurred in the earlier years for cultivation of Teak trees, Sevan trees, bank statements, ledger account and the buyers of the trees and sevan trees. Further Agreement entered with Torrent Power Grid Ltd. to cut some of the Teak trees for transmission line which pass
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through the assessee’s land. After considering the above explanation, evidences and other materials on record, the Assessing Officer satisfied that cultivation of Teak trees and Sevan trees by the assessee’s firm. Thus, the assessing officer accepted the income derived on the sale of Teak trees and Sevan trees of Rs.7,83,72,835/- from the agricultural land. However, the claim of expenditure incurred by the assessee of Rs. 5,75,975/- was found to be on a very lower side and therefore adopted at 5% on the sale of agricultural income of Rs.37,22,695/= as allowable expenditure by the assessee.
Thus we are of the considered view that the Assessing Officer while framing assessment order as well as reassessment order made proper enquiries with evidences. The Assessing Officer has accepted the explanations and completed the reassessment order u/s. 143(3) rws 147 of the Act. It is not the case of the assessee that the A.O. has not conducted necessary inquiry, verification before passing the reassessment order. The same cannot be construed either as ‘Lack of enquiry’ or as ‘Inadequate enquiry’. Thus the ld. PCIT cannot revise the reassessment order merely because he held a different opinion than that is verified by the Assessing Officer during the reassessment proceedings.
We are further guided by the Juri ictional High Court judgment in the case of CIT vs. Arvind Jewellers [2003] 259 ITR 502, wherein the Division Bench referring to the judgment of the Supreme Court in the case of Malabar Industrial Co. Ltd. observed that the provisions of Section 263 cannot be invoked to correct
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each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted and incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. The Hon’ble Supreme Court judgment has also made it clear that the phrase “prejudicial to the interests of the Revenue” has to be read in conjunction with an erroneous order passed by the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue. It is further emphatically stated that 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 with it cannot be treated as an erroneous order and prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law.
In this context of the present case, applying ratio of the above referred judgments, the scope of the Commissioner’s power of revision u/s. 263 of the Act would be, when the Assessing Officer conducts ‘no enquiry’ or ‘proper enquiries’ or “does not apply his mind to the legal issues arising out of the material on record”, the revisional powers would be available. On the other hand, if the Assessing Officer has conducted proper inquiries and come to legal conclusions which are plausible, the Ld. PCIT would not be justified in invoking Revisional juri iction directing further inquiries or taking a different view. In the present case, the Assessing Officer has issued a detailed notice u/s. 142(1) calling for I.T.A No. 695/Ahd/2019 A.Y. 2009-10 Page No 19 M/s. Greenwell Orchards vs. Pr.CIT
various details from the assessee and the assessee also had made detailed replies to the above notice with proper evidences and necessary records which are discussed in para 12 of this order. Thus the Assessing Officer having carried out such detailed enquiries satisfied with the explanation offered by the assessee, it is not open for the Ld. PCIT to thereafter Revise the assessment on mere apprehensions and surmises.
In the light of the above facts and legal position, we are of the considered view that the Assessing Officer had made detailed enquiries and after applying his mind and satisfied genuineness of the claim of agricultural income, which is plausible view adopted by the Assessing Officer. Therefore the Revisional proceedings initiated u/s. 263 is liable to be quashed.
Our above view is further supported by the Rulings of the Hon’ble Supreme Court and High Court judgements on this subject which would throw useful light on the scope of enquiry under Explanation 2 to Section 263 of the Act, which are as follows:
(a) CIT vs. Nirav Modi [2017] 77 taxmann.com 78 (SC) Section 68, read with section 263, of the Income-tax Act, 1961- Cash credit (Gift) – Assessment Years 2007-08 and 2008-09 – assessee received certain amount as gifts from his father and sister who were non-residents in India – Assessing Officer after making detailed enquiries, took a view that assessee had duly proved identity, source and creditworthiness of donors Commissioner, however, passed a revisional order under section 263 directing Assessing Officer to enquire into capacity of donors and to decide about genuineness of gifts afresh – it was noted that Commissioner in his order of revision, did not indicate any doubt in respect of genuineness of evidence produced by assessee – Moreover, satisfaction of Assessing Officer on basis of documents produced was not I.T.A No. 695/Ahd/2019 A.Y. 2009-10 Page No 20 M/s. Greenwell Orchards vs. Pr.CIT
shown to be erroneous – High Court by impugned order held that it was a case where a view had been taken by Assessing Officer after making proper enquiry and, thus, Tribunal was justified in setting aside impugned revisional order – Whether Special leave Petition filed against impugned order was to be dismissed – Held, Yes in favour of assessee. (b) CIT vs. Reliance Communication Ltd. [2016] 76 taxmann.com 226 (SC) Section 68, read with section 263, of the Income-tax Act, 1961 - Cash credits (FCCBs) - Assessee raised funds by way of FCCBs during year under consideration - Assessing Officer completed assessment accepting income declared by assessee - Commissioner noticed that no investigation was carried out by Assessing Officer to establish name and address, genuineness and creditworthiness of actual subscribers to FCCBs in terms of section 68 - He thus passed a revisional order setting aside assessment - Tribunal noted that Assessing Officer had made detailed enquiries about aforesaid aspect and mere fact that he did not make any reference to said issue in assessment order, could not make said order erroneous and prejudicial to interest of revenues - High Court by impugned order held that finding recorded by Tribunal being a finding of fact, no substantial question of law arose therefrom - Whether Special Leave Petition filed against impugned order was to be dismissed - Held, yes [Para 11] [In favour of assessee.
(c) CIT Vs. Well Wisher Construction (P.) Ltd. [2019] 106 taxmann.com 260 (SC).
Section 2(14), read with sections 28(i) and 263, of the Income-tax Act, 1961 - Capital gains - Capital asset (Surrender of plot) - Assessment year 2008- 09 - Assessee entered into a joint venture agreement for acquisition of a plot from Maharashtra Industrial Development Corporation (MIDC) - Allotment of plot was made by MIDC in February, 2006 - Assessee relinquished its right, title and interest in said plot in favour of other company - While filing return for relevant assessment year, assessee claimed that liability for payment of tax was not attracted - Assessing Officer taking a view that assessee did not carry on any business activity during relevant year or earlier years, accepted assessee's clam -
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Commissioner passed a revisional order setting aside assessment on ground that income earned by assessee was in nature of business income - Tribunal noted that Assessing Officer had thoroughly examined issue during course of scrutiny assessment proceedings and, had given a very categorical finding that any property whether connected with business or not other than stock-in-trade was a capital asset - Thus, Tribunal set aside revisional order passed by Commissioner - High Court upheld Tribunal's order - Whether, on facts, SLP filed against High Court's decision was to be dismissed - Held, yes [Para 2] [In favour of assessee]
(d) CIT vs. Shree Gayatri Associates [2019] 106 taxmann.com 31 (SC). Section 69A, read with section 263, of the Income-tax Act, 1961 – Unexplained moneys (On-money receipts) – Pursuant to search proceedings, assessee filed its return declaring certain unaccounted income – Assessing Officer completed assessment by making addition of said amount to assessee’s income – Commissioner passed a revisional order under section 263 on ground that Assessing Officer had not carried out detailed inquiries which included assessee’s on-money transactions – Tribunal thus set aside revisional order passed by Commissioner – High Court upheld Tribunal’s order – Whether, on facts, SLP filed against decision of High Court was to be dismissed – Held, yes in favour of assessee.
(e) Pr.CIT vs. Deep Industries Ltd. [2016] 67 taxmann.com 6 (Gujarat)
Section 14A, read with section 263, of the Income-tax Act, 1961 and rule 8D of the Income-Tax Rules, 1962 - Expenditure incurred in relation to income not includible in total income (Investment in mutual fund) - Assessment year 2009-10 - Assessee earned exempt income from investment in mutual fund - Assessing Officer disallowed part of interest expense under section 14A on account of earning said exempt income - Commissioner, by invoking powers under section 263, disallowed entire interest expense - Whether when view adopted by Assessing Officer was a plausible view, merely because Commissioner was of opinion that I.T.A No. 695/Ahd/2019 A.Y. 2009-10 Page No 22 M/s. Greenwell Orchards vs. Pr.CIT
Assessing Officer should have assessed interest expenditure at a higher figure, it could be said that assessment order was erroneous so as to warrant exercise of revisionary powers under section 263 - Held, no [Para 9] [In favour of assessee]
(f) CIT vs. Amit Corporation [2012] 21 taxmann.com 64 (Guj.). Section 263 of the Income-tax Act, 1961 – Revision – Of orders prejudicial to interest of revenue – Whether when, during course of framing of assessment, Assessing Officer had access to all records of assessee, and after perusing said records, he framed assessment, said assessment could not be re-opened in exercise of revision power under section 263 for making further inquiries- Held, yes in faovur of assessee.
As far as the second of limb of argument namely as per Explanation 1(c) of Section 263 when a subject matter has been considered and decided by Ld. Commissioner of Income Tax (Appeals), the same subject matter cannot be revise u/s. 263 by the PCIT. We have reproduced the appellate order of the Commissioner [Appeals] at paragraph 10.6 of this order. The reassessment proceedings was a subject matter of appeal before the Ld. CIT(A)-3, Ahmedabad and vide his order dated 18.07.2017 has dealt with the issue of agricultural income in very detailed manner more particularly at para 5.6 & 5. 7. As it can be seen Ld. CIT(A)’s order, the issue of income generated from agricultural activity was considered and decided the issue, therefore the same issue cannot be subjected to Revision by the Ld PCIT, which is against the Explanation 1(c) of Section 263 of the Act. Thus the Ld PCIT without verifying the status of the appeal proceedings with Ld CIT[A] invoked the Revision proceedings which is against law and unjustifiable. This view of ours is supported by the juri ictional
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High Court judgement in the case of Nirma Chemicals Works (P.) Ltd. [cited supra] wherein it was held that the Commissioner of Income-tax is required to ascertain whether the order referred to in sub-section (1) of section 263 of the Act had been the subject- matter of any appeal, and if yes, the revisional powers shall be available only if such subject-matter had not been considered and decided in such appeal.
Further the Bombay High Court in the case of K. Sera Sera Productions Ltd. [cited supra] held that the power to revise as conferred by section 263, is sought to be exercised so as not to deal with the same matters which have been considered and decided in the Appeal.
Thus, we find no error in the reassessment order passed by the Assessing Officer so as to justify initiation of revision proceedings u/s. 263 by the Ld. PCIT. Therefore the Revision order dated 21-02-2009 passed by the Ld PCIT-3 is hereby quashed and the grounds of appeal raised by the Assessee is allowed.
In the result, appeal filed by the Assessee is allowed.
Order pronounced in the open court on 26-08-2022 (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBERJUDICIAL MEMBER Ahmedabad : Dated 26/08/2022
I.T.A No. 695/Ahd/2019 A.Y. 2009-10 Page No 24 M/s. Greenwell Orchards vs. Pr.CIT
आदेश क" ""त"ल"प अ"े"षत / Copy of Order Forwarded to:-
Assessee
Revenue
Concerned CIT
CIT (A)
DR, ITAT, Ahmedabad
Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील"य अ"धकरण, अहमदाबाद