SHI vs. AGAR JAGDHARI YADAV,SURATVS.PR. COMMISSIONER OF INCOME TAX-1, SURAT., SURAT

आदेश / O R D E R

PER BIJAYANANDA PRUSETH, AM:

raised by the assessee are as follows: “1) The Ld. Pr. Commissioner of Income-tax, Surat-1 has erred in law, on facts and circumstances of the case to revise appellant’s assessment order u/s 263 of the Act, ignoring the fact and law that order of the ld. AO dated 12.04.2021 u/s 143(3) r.w.s. 143(3A) and 143(3B) of the Act is neither erroneous nor prejudicial to the interest of the revenue.

2. The appellant craves leaves to add, amend, alter or delete the said grounds of appeal.”

/AY.2018-19 Shivsagar Jagdhari Yadav 3. Facts of the case in brief are that the case was selected for limited scrutiny under CASS for the following reasons: “(i) property sold at a consideration (shown in ITR) less than value as per stamp authority (u/s 50C or any other relevant section), (ii) low capital gains with respect to sale consideration and (iii) purchase value of property less than the value as per stamp authority (u/s 56(2) or any other relevant section) (business ITR)”. The Assessing Officer (in short, ‘AO’) issued notices u/s 143(2) and 142(1) of the Act. After issue of several notices u/s 142(1), assessee made submission on 17.11.2020 which was not readable. Hence, another notice u/s 142(1) was issued, requesting assessee to submit readable documents. It is not clear from assessment order that assessee submitted any further details. However, the AO accepted the returned income in his order passed u/s 143(3) r.w.s. 143(3A) and 143(3B) of the Act. 3.1 Subsequently, the PCIT, Surat-1, Surat called for the assessment records and found that the assessee (donee) received 3551 square meters of non- agricultural land as gift from Shri Yogeshbhai Durga Prasad Thakkar (HUF), who was not a relative as per the definition in section 56 of the Act. The gift deed was duly registered with the Sub-Registrar-1, Athwa, Surat vide Registration No.19556, dated 26.09.2007. It was noticed from the said deed that Rs.8,35,200/- was paid by the donee as stamp duty for registering the gift deed. Considering the amount of stamp duty paid, value of the impugned non- agricultural land comes to Rs.1,17,44,898/-. Since the assessee donee received /AY.2018-19 Shivsagar Jagdhari Yadav non-agricultural land as gift from a non-relative without any consideration, provisions of section 56(2)(x)(b) of the Act are attracted. It was also observed that the gift deed was executed through a General Power of Attorney (GPA) executed by the donor in favour of the donee. Therefore, the assessee was both the donor and the donee. The AO had raised a query as to why provisions of section 56(2) should not be invoked. There was no reply of the assessee. However, AO passed the assessment order without making any addition on the issues picked up for selecting the case for scrutiny. The AO also failed to conduct inquiries and apply mind and correct provision of the Act u/s 56(2)(x) with regard to the immovable property acquired by the assessee without any consideration as gift from a non-relative. Therefore, amount of Rs.1,70,44,898/- should have been treated as income of assessee from other sources and added to the total income. Short levy of tax including interest on the above amount was Rs.84,19,091/-. The PCIT issued show cause notice which is at page 7 to 9 of the revision order u/s 263 of the Act. The reply is at page 10 and 11 of the said order. The assessee contended that the land in question is under dispute in the court of law and hence provisions of section 56(2)(x)(b) are not applicable. After considering the reply of assessee, the PCIT has noted various facts at para 4.1 of the revision order and observed that while finalizing the assessment proceedings, the AO did not make inquiry about the details of the gift deed and GPA. The facts noted by the PCIT in para 4.1 were not brought on record by AO during assessment proceedings. Hence, /AY.2018-19 Shivsagar Jagdhari Yadav AO passed the order without making any inquiry and without application of mind and law. The assessee has acknowledged the property as gift and this position has been consistently maintained even before the Hon’ble Civil Court. Hence, the income derived from gift is taxable. The AO clearly placed the gift deed on record but has not taken note of the fact that assessee did not reply to the specific query regarding application of section 56(2)(x) of the Act. The onus was on the AO to verify the facts and application of relevant provisions of the Act. In absence of reply by the assessee, the AO should have made addition u/s 56(2)(x) of the Act, which he failed to do. Hence, the order of AO was erroneous in so far as prejudicial to the interests of revenue within the meaning of section 263 of the Act. The PCIT has extracted provisions of section 263 of the Act and relied upon various decisions of Hon’ble Supreme Court and High Court i.e., Malabar Industries Ltd. vs. CIT, 243 ITR 83 (SC), CIT vs. Paville Projects Ltd., 149 taxman.com 115 (SC), CIT vs. Nagesh Knitwears Pvt. Ltd., 345 ITR 135 (Delhi) and Gee Veen Enterprises vs. Addl. CIT, 99 ITR 375 (Delhi) and held that assessment order passed by the AO is erroneous in so far as it is prejudicial to the interests of revenue. The PCIT directed the AO to pass fresh assessment order after taking into consideration the issues and facts discussed in the revision order u/s 263 of the Act.