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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI PRAMOD KUMAR & SHRI SUDHANSHU SRIVASTAVA
PER SUDHANSHU SRIVASTAVA, J.M.
ITA No. 1104/Del/2013 is the Department’s Appeal preferred
against the order dated 11.12.2012 passed by the Ld. CIT(A)-13, New
Delhi for assessment year 2008-0. ITA No. 4652/Del/2014 is the Appeal
preferred by the Assessee against the order passed u/s. 263 of the Act by
the Ld. CIT-XII, New Delhi for the assessment year 1998-99 whereas the
ITA No. 4653/Del/2014 is the Assessee’s Appeal for assessment year
2008-09 and challenges the order of the CIT(A)-XXVII, New Delhi wherein
vide order dated 12.6.2014 the Ld. CIT(A) has upheld the order passed
u/s. 143(3) of the Act subsequent to the order passed u/s. 263 of the Act.
All the three appeals were heard together and for the sake of convenience
there are being disposed of by this common order.
Following grounds have been raised by the revenue:- (i) “On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in giving direction to the AO in para 5 ‘to consider the original date of transfer of land as point of transfer and decide the merit of the case accordingly’ as it amounts to setting aside the order of A.O. which is not permitted u/s 251(l)(a) of the Income Tax Act.” (ii) “On the facts and in the circumstances of the case, the order of CIT(A) had erred in holding that the agricultural land for which assessee received compensation/interest was not capital asset u/s 2(14)(iii) of the Income Tax Act in the F.Y. 2003-04 when the land was originally acquired by Govt, and also in the F.Y. 1997-98, when the assessee received enhanced compensation/solatium/interest.” (iii) “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) had erred in not discussing and giving any finding on the stand of the A.O. and case laws relied upon by the A.O.” (iv) “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) had admitted additional evidence a letter dated 03.02.2010 from Block Development Officer, East Delhi, ignoring the judgment of jurisdictional Delhi High Court in the case of Manish Buildwell Pvt. Ltd.” (v) “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) had erred by ignoring the fact that during the pendency of appeal, the CIT, Delhi-XII u/s 263 had set aside the order of the A.O. to recomputed the income and tax the entire 2
interest of Rs.26,38,462/- on enhanced compensation. This fact was specifically pointed out by the assessee during the appellate proceedings before the CIT(A) and discussed on page 9 & 10 of the order.”
Following grounds have been raised by the assessee in ITA No. 4652/Del/2014 :-
“1) That the order dated 30/03/2012 of the learned CIT-XII, New Delhi (Ld. CIT) under section 263 is bad both in law and on facts of the case. That the CIT wrongly assumed jurisdiction under section 263. That the jurisdictional facts for invocation of section 263 are absent. 2) That the observation of the Ld. CIT-XII, New Delhi while passing order under section 263 that the assessment order passed by the AO was erroneous, without application of mind, without making necessary enquiries and accepting the contention of the assessee is incorrect, absolutely biased and not in accordance with the provisions of the Act. 3) That the Ld. CIT has not properly scanned the assessment records wherein it is abundant clear that AO had duly applied his mind and made necessary enquiries before passing the assessment order. That the assessment order is neither erroneous, nor prejudicial to the interest of the revenue. 4) That the conclusion of the Ld. CIT-XII, New Delhi , that the order of the AO is erroneous and prejudicial to the interest of the revenue is not based on cogent material reasoning as well as not based on the pronouncements of the apex court. 5) That the directions of the Ld. CIT-XII, New Delhi under section 263 is erroneous for setting aside the assessment order of the AO for framing the assessment de novo and the CIT has erred in directing charge of interest of Rs. 26,38,462/- on receipt basis in the year of receipt. 6) That the action of the Ld. CIT-XII, New Delhi by setting aside the order of the A.O. with a direction to reopen the case and re-compute the income and tax the entire interest of Rs.26,38,462/- is not in accordance with the provisions of the Income Tax Act, 1961. 3
7) That the order under section 263 is without the valid jurisdiction as the assessee’s appeal against the order of the A.O. was pending before the Ld.CIT-XXVII. 8) That the order under section 263 has been passed without a valid show cause notice on the assessee and this vitiates the proceedings.
9) That no proper opportunity was given to the assessee and the Ld. CIT-XII, New Delhi passed the order under section 263 in a haste and mechanical manner. 10) That the appellant craves leave to add, to alter, to delete all or any grounds of appeal.”
Following grounds have been raised in ITA No. 4653/Del/2014:
That the order of the Ld. CIT (A) is bad both in law and on the facts of the case.
That the Ld. CIT (A) has erred in upholding the assessment framed by the Assessing Officer at a figure of Rs. 50,86,818/- and thus has erred in upholding the demand raised by the AO at Rs. 56,22,808/-. 3. That the AO erred in adding to income an amount of Rs. 50,86,818/- on account of Capital Gains/ Interest Income and the CIT (A) erred in upholding the same. 4. That the Ld. AO erred both in law and on facts by adding an amount of Rs.24,48,356/-under the head Capital Gains on account of money received towards compulsory acquisition of Rural agricultural Lands (owned by the family of the appellant for centuries and being used for agricultural purposes which were absolutely under the purview of Gram Panchayat at the time the land was acquired) and the CIT (A) erred in upholding the same. 5. That the Ld. AO passed the assessment order summarily without taking into consideration the directions of the Ld. Commissioner of Income Tax (Appeals)- XXX, New Delhi (order dated 11/12/2012) and CIT (A) erred in by upholding the same. 6) That the CIT (A) has erred in holding that the order of CIT (A)- XXX is null and void and erred by confirming/ upholding the order of AO by taxing Rs: 24,48,356/- under the head Capital Gains, whereas the CIT (A)- XXX had specifically held specifically that the capital gains not to be taxable. Hence, the
order of the CIT (A)- XXVII is beyond the jurisdictional powers on the principles of “Rules of Finality”. 7) That in any case the land which has been subjected to Capital Gains was agricultural in nature and was not a Capital Asset within the meaning of Sec 2(14) of Income Tax Act and the income relating to same could not have been made the subject of taxation and CIT(Appeals) erred in by upholding the same. That the Sec 45/45(5) does not apply on the facts of the case and CIT(Appeals) erred in by upholding the same. 8) That the assessment framed by the Ld. AO is totally arbitrary since he did not even take cognizance of the basic and fundamental aspects of the location and the nature of the land and thereby hurriedly completed the assessment which is purely based on surmises and guess work, and CIT(Appeals) erred in by upholding the same. 9) That the details regarding the nature of property/ location were available with Ld. AO but still he ignored the same and framed the assessment and thus the same is vitiated in law, and CIT(Appeals) erred in by upholding the same. 10) That the necessary evidences given to the Ld. AO regarding nature of the property and its not being a Capital Asset u/s 2(14) have been completely ignored by him, and CIT(Appeals) erred in by upholding the same. 11) That in any case Ld. AO didn’t grant time and permit procurement of further evidences (existing) to prove that the Asset is not a Capital u/s 2(14) and is purely Agricultural land in nature; inspite of the specific request of the appellant he completed the assessment in rushed manner and in violation of the principles of natural justice and rule of audi-all-partem, and Commissioner of Income Tax(A) erred by upholding the same. 12) That in any case the amount added to the income did not pertain to relevant previous year. 13) That the Ld. AO has erred in law and on facts by taxing an amount of Rs. 26,28,342/- on account of interest income on receipt basis, and CIT(Appeals) erred in by upholding the same. 14) The Ld. CIT (A) has erred in law and on facts by confirming the action of the Ld. AO of taxing the entire interest in the year of receipt which is absolutely against the spirit of the law, as the AO/ CIT (A) didn’t take into consideration the judgement of the apex court in this regard. 15) That in any case the amount added to the income didn’t 5
pertain to relevant Previous Year and has been wrongly added to the Income of the year ignoring the well settled position of law in Rama Bai’s Case and more so by unnecessarily disturbing his predecessors order, (order dated 24.12.2009), and CIT(Appeals) erred in by upholding the same. 16) That the Ld. AO passed the order absolutely mechanically by following the whimsical order of the Ld. CIT-XII, without applying his own mind in this regard and CIT(Appeals) erred in by upholding the same. 17) That the Ld. AO has not considered the submissions of the Appellant that the entire amount is not taxable at all as the same had already become time barred, and CIT(Appeals) erred in by upholding the same. 18) That the Order of Ld. AO is based on surmises and is absolutely mechanical in nature and further all relevant evidences were ignored while computing the assessment and the assessment framed is time barred, and CIT(Appeals) erred in by upholding the same. 19) That the Ld. CIT/ Ld. AO failed to take into consideration the fundamental principle of EQUALITY by absolutely ignoring the fact of Non Taxable Order having been passed by the AO in the case of similarly placed another, assessee who is from the same village whose agricultural lands were also acquired by the Delhi Government similarly. 20) That the Ld. AO erred by initiating penalty proceedings u/s 274/ 271(l)(c) of the Income Tax Act, 1961, and CIT(Appeals) erred in by upholding the same. 21) That the Ld. AO wrongly charged the interest u/s 234(A), 234(B), 234(C) totaling to Rs.10,74,724/- (Rs. 4,77,655+Rs.5,97,069), and CIT(Appeals) erred in by upholding the same. 22) That the Ld. AO wrongly charged the interest u/s 220(2) amounting to Rs. 33,80,412/-, and CIT(Appeals) erred in by upholding the same. 23) The appellant craves to leave to add, to alter, and to delete all or any grounds of appeal, and CIT(Appeals) erred in by upholding the same.”
The brief facts of the case are that on the basis of some information gathered from Pay & Accounts Office, Delhi, Government of India, it was found that the land of assessee’s husband (now deceased) Sh. Om Bir Singh) was acquired by the Delhi Government and the amount of Rs. 48,22,972/- was paid to the assessee’s husband as compensation / additional compensation / enhanced compensation/ solatium on account of transfer of capital assets by way of compulsory acquisition. This amount included interest of Rs. 26,38,462/-. Statutory notice u/s. 142(1) of the Act was issued to the assessee who was alive at that time, but no compliance was made. Thereafter, the AO passed an exparte order u/s. 144 of the Act on 28.4.2000 assessing the income at Rs. 48,22,972/-. 6. The Assessee preferred an appeal before the Ld. CIT(A) who upheld the assessment order. Further aggrieved, the assessee approached the ITAT and the ITAT, vide its order dated 9.9.2008 in ITA Nos. 1758, 1759 & 1760/Del/2003, restored the matter back to the file of the AO for making denovo assessment. Subsequently, the assessee was represented through the legal heir of the assessee and it was submitted before the AO that the impugned land was in the nature of agricultural land and therefore the land was outside the purview of definition of ‘capital asset’ as defined in Section 2(14) of the Act and, therefore any compensation received on compulsory acquisition was not taxable. In support of the claim, a copy of Census of India, 1981 for the Village Gharoli, where the land was situated was also submitted according to which the population of the village Gharoli was only 1985. However, the AO did not accept the assessee’s contention and took the view that in view of the provisions contained in section 45(5) of the Act, any compensation received by the assessee was to be deemed as income chargeable under the head ‘capital gain’ for the previous year in which the amount was 7
received by the assessee. The AO proceeded to make the addition of Rs. 2448356/- being capital gain in the hands of the assessee. The AO also made the addition of Rs. 254637/- being the interest apportioned out of the total amount of interest of Rs. 2638462/- for the year under consideration. 7. Aggrieved with this order the Assessee again approached the Ld. CIT(A). In the meanwhile the Ld. Commissioner of Income Tax-XII, New Delhi also initiated the proceedings u/s. 263 of the Act noting that the original assessment u/s. 144 of the Act was completed at Rs. 4822972/- which had been upheld by the erstwhile Ld. CIT(A) whereas in the second round of assessment, on the matter being restored to the file of the AO by the ITAT, the AO had completed the assessment at Rs. 2702993/- only and it was the view of the Ld. CIT that the interest income to the extent of Rs. 2383825/- had gone untaxed. As per the Ld. CIT, the order of the AO was erroneous and prejudicial to the interest of the revenue. The Assessee is in appeal against the order passed u/s. 263 of the Act in ITA No. 4562/Del/2014. The Assessee’s appeal against the assessment order dated 24.12.2009, in which the AO had assessed the income at Rs. 2702993/-, in the second round of assessment proceedings after being set aside by the ITAT was also decided vide order dated 11.12.2012 and this Appeal was statistically allowed by the Ld. CIT(A) and the Department is now in appeal before the ITAT challenging the direction of the CIT(A) that since the land in question was not capital asset u/s. 2(14) of the Act, the AO should consider the original date of transfer of land as the point of transfer and decide the merits of the case accordingly. This appeal by the Department bears caption No. 1104/Del/2013. Consequential order subsequent to the proceedings u/s. 263 of the Act was passed by the AO in which the assessment was completed at Rs. 50,86,818/- by taxing the entire interest income of Rs. 26,38,462/- on receipt basis. The 8
Assessee’s appeal against this order of assessment was dismissed by the Ld. CIT(A) and the Assessee is in appeal against this order before the ITAT in Appeal caption No. 4653/Del/2014. 8. At the outset, it was brought to the notice of the Bench that the Department’s Appeal bearing No. 1104/Del/2013 was admittedly below the tax limit prescribed for filing the appeal before the ITAT. The Ld. Sr. DR appearing on behalf of the Department accepted that the plea of the A.R. of the assessee that the Appeal of the Department was below the tax limit for filing the appeal before the Tribunal was correct. Accordingly, ITA No. 1104/Del/2013 is dismissed being below the tax effect. 9. With respect to assessee’s appeal challenging the proceedings u/s. 263, the AR submitted that there was a delay of 815 days in filing the appeal before the ITAT. Our attention was drawn to the delay condonation application filed by the Assessee’s legal heir in this behalf as well as the affidavit which had been filed in support of the delay condonation application wherein it had been averred that the Appeal could not be filed due to bonafide reasons and that there was no negligence or inaction or lack of bonafides on the part of the appellant. Request was made that the delay may be condoned. 9. Sr. DR opposed the application for condonation of delay. 10. Having heard both the parties and keeping in mind that the assessee has since deceased and is being represented by her widow who herself is above 80 years of age and who did not have adequate legal assistance so as to safeguard her interest, we deem it appropriate to condone the delay and accordingly admit the appeal for hearing. 11. The Ld. AR submitted that the order passed u/s. 263 of the Act was bad in law because the AO had correctly brought to tax interest amount of Rs. 254637/- out of the total interest received of Rs. 2638462/-. It was submitted that the act of the AO was in 9
conformity with the law laid down by the Hon’ble Apex Court in the case of Rama Bai reported in 181 ITR 400 (SC) and, therefore, it could not be said that the AO had not applied his mind while passing the assessment order as has been alleged by the Ld. CIT. It was also submitted that out of the two courses of action which the AO could have taken, the AO took one of the plausible views. For this reliance was placed on the judgment of the Hon’ble Bombay High Court in the case of Gabriel India reported in 203 ITR 108 (Mumbai). It was also submitted that the jurisdiction invoked by the Ld. CIT u/s. 263 of the Act was patently wrong on the facts of the case because it could not be said that the AO had taken up a patently wrong view. Reliance was also placed on the judgment of Hon’ble Delhi High Court in the case of DG Housing reported 343 ITR 529 (Del). The AR reiterated that the AO’s order was not erroneous. 12. Coming to the assessee’s appeal which was against the consequential order subsequent to the order passed u/s. 263 of the Act, it was submitted that since the amount added to the income did not pertain to the relevant previous year, the same has wrongly been added to the income of the year under consideration ignoring the well settled position of law in Rama Bai’s case (Supra). It was submitted that this order of the Ld. CIT deserve to be set aside. 13. In response, the Ld. Sr. DR placed extensive reliance on the observations of the Ld. CIT in the order passed u/s. 263 of the Act and submitted that the Ld. CIT had rightly invoked the jurisdiction u/s. 263 of the Act. Similarly, with respect to the assessee’s appeal against the quantum proceedings, the Sr. DR placed reliance on the concurrent findings of the AO as well as Ld. CIT(A) and submitted that no interference is called for in this regard.
We have heard the rival submissions and perused the material on record. We take up the assessee’s appeal challenging the 263 proceedings first. It is noticed that the AO has taken recourse to charging the interest to tax only of that portion which could be attributed to the year under consideration by duly keeping the ratio of the Hon’ble Apex Court in the case of Rama Bai (supra) in mind. It has been held in Rama Bai’s case that interest cannot be taken to have accrued on the date of the order of the court granting enhanced compensation but has to be taken as having accrued year after year from the date of delivery of possession of the lands till the date of such order. Thus, the AO has taken a view which was permissible in law and it could not be said that the AO’s action in apportioning the interest was against the law. It is settled law that once the AO takes one of the view out of two possible views, it cannot be said that he has acted against the law. Similarly, the Hon’ble Bombay High Court in the case of Gabriel India (Supra) has held that once the AO has taken a possible view, the jurisdiction of the Ld. CIT to take action u/s. 263 of the Act is ousted. The Court further observed as under:
“We, therefore, hold that in order to exercise power under sub-section (1) of section 263 of the Act there must be material before the Commissioner to consider that the order passed by the Income-tax Officer was erroneous in so far as it is prejudicial to the interests of the Revenue. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the Income-tax Officer without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the Revenue. An order can be said to be prejudicial to the interests of the Revenue if it is not in accordance with the law in consequence whereof the lawful
revenue due to the State has not been realised or cannot be realised. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo motu revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the court it would be open to the courts to examine whether the relevant objective factors were available from the records called for and examined by such authority. Our aforesaid conclusion gets full support from a decision of Sabyasachi Mukharji J. (as his Lordship then was) in Russell Properties Pvt. Ltd. v. A. Chowdhury, Addl. CIT . In our opinion, any other view in the matter will amount to giving unbridled and arbitrary power to the revising authority to initiate proceedings for revision in every case and start re-examination and fresh enquiries in matters which have already been concluded under the law. As already stated it is a quasi judicial power hedged in with limitation and has to be exercised subject to the same and within its scope and ambit. So far as calling for the records and examining the same is concerned, undoubtedly, it is an administrative act, but on examination "to consider" or in other words, to form an opinion that the particular order is erroneous in so tar as it is prejudicial to the interests of the Revenue, is a quasi-judicial act because on this consideration or opinion the whole machinery of re-examination and reconsideration of an order of assessment, which has already been concluded and
controversy which has been set at rest, is set again in motion. It is an important decision and the same cannot be based on the whims or caprice of the revising authority. There must be materials available from the records called for by the Commissioner.” 15. We further note that the Hon’ble Supreme Court in the case
of Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax,
(2000) 243 ITR 83 (SC), had observed that the phrase “prejudicial
to the interest of Revenue‟ has to be read in conjunction with an
erroneous order passed by the Assessing Officer. Every loss of
Revenue as a consequence of an order of the Assessing Officer
cannot be treated as prejudicial to the interest of Revenue. Thus,
when the Assessing Officer had adopted one of the courses
permissible and available to him, and this has resulted in loss to
Revenue; or two views were possible and the Assessing Officer has
taken one view with which the CIT may not agree; the said orders
cannot be treated as an erroneous order prejudicial to the interest
of Revenue unless the view taken by the Assessing Officer is
unsustainable in law. In such matters, the CIT must give a finding
that the view taken by the Assessing Officer is unsustainable in law
and, therefore, the order is erroneous. He must also show that
prejudice is caused to the interest of the Revenue.
We further find our support from the judgment of the
Hon’ble Delhi High Court also in the case of DG Housing (Supra).
Therefore, in view of the above cited decisions and respectfully
following the same we have no hesitation in holding that the
proceedings initiated u/s. 263 of the Act were bad in law and are
liable to be quashed. Accordingly, we quash the proceedings
initiated u/s. 263 of the Act and ITA No. 4652/Del/2014 stands
allowed.
Since we have already quashed the proceedings initiated u/s.
263 of the Act the consequential assessment proceedings
subsequent to the order passed u/s. 263 also become infructuous
and as a result the Appeal of the Assessee also become infructuous
and the same is dismissed as such. Accordingly, the ITA No.
4653/Del/2014 stands dismissed.
In the final result, the ITA No. 1104/Del/2013 and ITA No. 4653/Del/2014 stand dismissed and ITA No. 4652/Del/2014 stand allowed. Order pronounced in the Open Court on 29.08.2018.
Sd/- Sd/- (PRAMOD KUMAR) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 29.08.2018 ‘SRB/GS’