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Income Tax Appellate Tribunal, CHANDIGARH
Before: SMT. DIVA SINGH & SHRI VIKRAM SINGH YADAV
आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण,च�डीगढ़ �यायपीठ आयकर अपीलीय अिधकरण च�डीगढ़ �यायपीठ च�डीगढ़ �यायपीठ ‘‘बी च�डीगढ़ �यायपीठ बी.’’, च�डीगढ़ च�डीगढ़ च�डीगढ़ च�डीगढ़ बी बी IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH ‘B’ CHANDIGARH BEFORE: SMT. DIVA SINGH, JUDICIAL MEMBER & SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकर अपील अपील संसंसंसं./ आयकर आयकर आयकर अपील अपील Assessment Year : 2015-16 Shri Mahesh Chug, The Pr. CIT-I, बनाम # 3113, Sector 28-D, Chandigarh-2. VS Chandigarh. �थायी लेखा सं./PAN /TAN No: ACZPC8060H अपीलाथ�/Appellant ��यथ�/Respondent िनधा�रती क� ओर से/Assessee by : Shri Tejmohan Singh, Advocate राज�व क� ओर से/ Revenue by : Shri Sarabjeet Singh, CIT-DR तारीख/Date of Hearing : 09.03.2022 उदघोषणा क� तारीख/Date of Pronouncement : 21.04.2022 HEARING VIA WEBEX AND PHYSICAL COURT आदेश आदेश/ORDER आदेश आदेश PER DIVA SINGH
The present appeal has been filed by the assessee assailing the correctness of the order dated 20.03.2020 of Pr.CIT-2, Chandigarh pertaining to 2015-16 assessment year on the following grounds :
That the Ld. Commissioner of Income Tax has wrongly assumed jurisdiction under section 263 of the Act to set-aside the assessment order dated 08.12.2017 passed by the Assessing Officer in as much as the order is neither erroneous nor prejudicial to the interest of Revenue and as such the assumption of jurisdiction under section 263 of the Act is beyond his competence.
2. That the Ld. Principal Commissioner of Income Tax has failed to consider that the case of the assessee was picked up for limited scrutiny and the issues in that regard including sale/purchase of property, indexed cost, etc. were thoroughly looked into and as such the assessment order passed was neither erroneous not prejudicial.
ITA 104 /CHD/2021 A.Y. 2015-16 Page 2 of 25 3. That the Ld. Commissioner of Income Tax has erred in failing to consider the various replies and submissions placed on record in proceedings before her in the correct perspective which is arbitrary and unjustified.
4. That the evidence placed before the Ld. Principal Commissioner of Income Tax has not been looked into by the PCIT himself and the matter cannot be sent back to the Assessing Officer without making any enquiry which renders the order illegal, arbitrary and unjustified.
5. That the assessment order having been passed by the Assessing Officer after due application of mind and taking into consideration the various replies and material on record, the action resorted to by the Commissioner of Income Tax is unwarranted and uncalled for.
That the order of Commissioner of Income tax is erroneous, arbitrary, opposed to the facts of the case and is unsustainable in law.
2. The hearing in the present case effectively took place on 02.02.2022 on which date the ld. AR and the ld. DR more or less made their complete submissions on facts and law, however, the submissions of the ld. DR were incomplete to the extent that he sought time to verify properly from the record the calculations made available by the ld. AR.
Accordingly, time was granted and the appeal was adjourned to 09.02.2022. On the said date, due to medical reasons, the counsel was unable to represent. The appeal stood adjourned accordingly to 23.02.2022 however, on account of the ongoing strike of Electricity Department, there were multiple connectivity issues in the hearing conducted via Webex. Accordingly, the hearing was adjourned to 02.03.2022. Since on the said date, physical hearing had started and both the sides remained busy before the other Court, the hearing ultimately concluded on 09.03.2022 in the physical Court.
ITA 104 /CHD/2021 A.Y. 2015-16 Page 3 of 25
Before addressing the specific grievance of the assessee, it is pertinent to address the delay of 355 days pointed out by the Registry. The ld. AR in the hearing via Webex had invited attention to the Affidavit filed by the assessee. Relying on the same, he made a prayer that the delay may be condoned in view of the extra-ordinary prevailing Pandemic conditions. For ready reference, the Affidavit of the assessee relied upon by the ld. AR is extracted hereunder :
Affidavit
I. Mahesh Chugh son of Late Jatinder Lai Chugh, age 54 years resident of House No. 3420, Sector 27D, Chandigarh do hereby solemnly affirm and declare as under: -
1. 1. That I have received the order of Commissioner of Income Tax - 2, Chandigarh on 31.03.2020 for the assessment year 2015-16 against which an appeal was to be filed by 30.05.2020.
2. That the appeal was filed on 20.05.2021 which is late by 355 days as per show cause notice issued by the ITAT.
3. That the order was received by the Counsel during the lockdown period which was imposed due to Covid - 19 Pandemic and as such the appeal could not be filed in time.
4. That in view of the raging pandemic, the Supreme Court of India Suo moto in "Cognizance for Extension of Limitation" reported in 432 ITR 206 has extended the timelines for filing appeals under all laws, including the Income Tax in the case. Accordingly, the original deadline of 60 days for filing appeal, which was expiring on 30.05.2020 stands extended.
5. That the period from Marchl5 2020 till March 14 2021 stand excluded as per the decision of the Hon'ble Supreme Court. As such, the instant appeal was to be filed by 12th of May 2021. Thus there was a delay of only 8 days.
6. That unfortunately my Counsel Sh. Arvind Mehta Advocate expired due to Covid- 19 on the 05.05.2021 after being hospitalized for almost a month. Copy of the death certificate has not been issued till date because of Covid.
7. That one of his office staff looking after Income Tax Matters Sh. Vinod also expired in the month of April 2021.
ITA 104 /CHD/2021 A.Y. 2015-16 Page 4 of 25
8. That I contacted Shri Tejmohan Singh, Advocate for filing of appeal after files from the office of Late Sh. Arvind Mehta Advocate and the appeal was filed on 20.05.2021. Sd/- Deponent Verification: Verified that the above noted contents of my affidavit are true and correct to the best of my knowledge and belief and nothing has been concealed therein. Dated: 07.06.2021 Sd/- Deponent 3.1. Accordingly, placing heavy reliance on the aggravating circumstances as set out in the aforesaid application and affidavit, it was his prayer that the delay may be condoned.
3.2. The ld.CIT-DR considering the contents of the application and the record posed no objection in case the delay is condoned.
3.3. In the light of the submissions of the parties before the Bench, considering the peculiar circumstances as brought on record which are not in dispute and the position of law as relied upon we deem it appropriate to condone the delay. Satisfied by the explanation offered, the delay is, accordingly, condoned. Ordered accordingly.
The ld. AR, accordingly, was directed to address the grievance of the assessee in the appeal filed. On behalf of the assessee, it was submitted at the outset that the assessee does not wish to specifically press ground No. 2 as the issue would stand addressed by the other grounds.
ITA 104 /CHD/2021 A.Y. 2015-16 Page 5 of 25
In the said background, addressing the grievance posed on behalf of the assessee vide Ground Nos. 1,3,4,5 and 6, the ld. AR carrying the Bench through the assessment order dated 08.12.2017 passed u/s 143(3) and the impugned order under challenge of the ld. PCIT-II Chandigarh submitted that in the facts and circumstances of the present case, there is no error let alone an error which can be considered to be prejudicial to the interests of the Revenue. It was his submission that complete facts have been taken into consideration by the AO and have been fully addressed by the assessee. The facts are fully addressed again by the assessee before the ld. PCIT. The Show Cause Notice issued by the ld. PCIT, it was submitted, has been extracted in the impugned order itself, copy of the same, it was submitted, has also been separately filed at Paper Book pages 25 to 27.
It was his submission that this show cause notice has been replied to by the assessee. This reply is appended at page 28 to 30 of the Paper Book. Part of the same, it was submitted, has been extracted in the impugned order itself.
Considering the same, the ld. PCIT ultimately concluded that to the extent of to Rs. 10.15 lacs i.e. the renovation expenses claimed for deduction u/s 54F was such an error which was prejudicial to the interests of the Revenue. In the said background, carrying the Bench through para 3 and 3.1
ITA 104 /CHD/2021 A.Y. 2015-16 Page 6 of 25 of the impugned order, it was submitted that all these details were before the AO and were considered. Without prejudice to the said argument, it was submitted that even if for a moment it is considered that these were not before AO, the fact on record is that these were filed before ld. PCIT.
No error in these details of construction cost made available to the Revenue has been brought on record. Attention was invited to the facts. The assessee represented by its counsel Shri Arvind Mehta as noted by the ld. PCIT himself in his order attended the proceedings and filed details of expenses for construction/renovation of house No. 3113 Sector 28D, Chandigarh. It was submitted that though the ld. PCIT records that these were not filed during the assessment proceedings which issue is disputed by the assessee, however, since the counsel who was appearing has expired, no affidavits etc. can be now filed. It was argued that the fact remains that these were made available to the ld. PCIT and the ld. PCIT does not fault any of these details. He does not point out to any error in the claim of the assessee. The supporting claim, it was submitted, is based on facts and evidences and co-related with payments by cheque from the banks to a large extent. The ld. PCIT ignoring the evidences made available merely proceeds to cancel and set aside the validly passed assessment order for consideration afresh
ITA 104 /CHD/2021 A.Y. 2015-16 Page 7 of 25 without pointing to any error justifying the suspicion. It was his submission that the said action of the ld. PCIT was contrary to the settled legal position as has been variously addressed by the Courts. The power to set aside the assessment order u/s 263, it was submitted, is vested with the ld. PCIT for a specific purpose. It was his submission that as per law, it was to be exercised with due care and caution pointing out to the error in the order sought to be set aside and the error should be of such magnitude which can be said to be prejudicial to the interests of the Revenue.
The Courts have variously held that this power should be exercised clearly pointing out the error, it cannot be exercised whimsically or arbitrarily. Addressing the legal position on the issue, it was submitted that the Courts have repeatedly held that it is incumbent upon the ld. PCIT to specifically point out the error. It was argued that merely because there is a suspicion that some more details were not called forth by the AO, that itself cannot be a ground to set aside the order. The details were available to the AO and were also filed before the ld. PCIT. It was conceded that today he is not in a position to categorically state whether these details were shown to the AO or not as Shri Arvind Mehta, CA who was taking care of the assessee's case before the AO and appeared before AO as well as before the ld. PCIT
ITA 104 /CHD/2021 A.Y. 2015-16 Page 8 of 25 unfortunately is no more as he passed away in the COVID times. As a result of this unfortunate fact, he would not be in a position to categorically state that the evidences were available to the AO. However, the suspicion that the issues had not been enquired into by the AO, it was argued, is unfounded.
5.1 Attention was invited to Paper Book page 1 and 2 which is questionnaire dated 05.12.2016 issued by the AO in the course of the assessment proceedings. It was argued that the issue was fully looked into by the AO who being satisfied with the answers to the queries raised in the assessment proceedings accepted the claim which concluded in an order passed u/s 143(3) dated 08.12.2017. Referring to the questionnaire dated 05.12.2016, specific attention was invited to question 4 and 5 of the same. For ready reference, the same is extracted hereunder :
No.ITO/Ward-5(1) /CHD/2 015-16 Office of the Income Tax Officer, Ward-5(1), Room No.619, Aayakar Bhawan, Sector-17, Chandigarh. Dated:05-12-2016 To SH. MAHESH CHUGH, H.NO. 3420,SECTOR27-D, CHANDIGARH. PAN: ACZPC8060H Sir, Sub. : Assessment for the assessment year 2015-16- Regarding- Please refer to the assessment proceedings in your case for the above mentioned assessment year.
ITA 104 /CHD/2021 A.Y. 2015-16 Page 9 of 25
2. To enable the undersigned to frame assessment in your case, you are required to furnish/intimate/explain the following on the time & date as mentioned on the notice- u/s 142(1) of the Act issued separately: 1……………………. 2…………………… 3……………………. 4. As per information available with the department you have made large investments in the immovable properties. Please furnish the details of the immovable properties purchased by you in your name or in the name of your family member alongwith source of investment. 5. Please furnish the details of deductions claimed u/s 54 along with copies of sale/purchase deeds of properties and calculations of LTCG. This information is being called for under section 142(1) of the Income Tax Act,1961 and should be furnished on 22.12.2016 at 11:45 A.M..”
5.2. Referring to the above queries, it was submitted, that there can be no doubt that the issue was fully examined by the AO. When considered with the construction details made available to the ld. PCIT wherein no fault has been pointed out, it was argued that the exercise of powers is whimsical and arbitrary.
5.3 Reverting to the record, attention was invited to reply of the assessee appended thereto at Paper Book pages 3 to 5.
Copy of the return filed alongwith the computation, it was submitted, is at pages 6 to 11. Specific attention was invited to the sale consideration received for plot No. 182/49, Industrial Area, Phase-I wherein the assessee had 50% share, value of which u/s 50C was Rs.1.55 Crores. After reducing the purchase cost and the Index Cost etc., the deduction u/s 54F of Rs. 1,28,91,083/- was claimed. The investment in house property u/s 54F was made to the tune of Rs. 1,55,00,000.00. This was a Bay shop No. 13-14 Sector
ITA 104 /CHD/2021 A.Y. 2015-16 Page 10 of 25 27-D. Considering the value u/s 50C and the share of the assessee, minus Index Cost and the purchase cost, deduction claimed u/s 54F referring to page 10 of the Paper Book, it was submitted, was Rs.56,94,658/-. The investment in house property u/s 54F, it was submitted, was of Rs. 72,50,000/-. Inviting attention to copy of the Purchase Deed appended at pages 12 to 23 of House No. 3113, Sector 28D. It was submitted that these were filed before the AO as well as the PCIT.
5.4. In the said background, in the hearings which continued before the AO, the following reply advanced on behalf of the assessee appended at Paper Book page 24, it was submitted would show that the claim justified on facts before the AO was allowed after properly considering the evidences. The reply before AO was also filed before the ld. PCIT also and is completely supported by evidences wherein no infirmity has been pointed out by the ld. PCIT except a suspicion. For ready reference, it is extracted hereunder :
To The Income Tax Officer Ward-5(1) Chandigarh Subject: Regarding assessment u/s 143(2) of the Income Tax Act, 1961 in the case of Sh. Mahesh Chugh, H.No-3420, Sector-27C, Chandigarh for A.Y 2015-16 PAN: ACZPC8060H. Sir This is in continuation to the assessment proceedings in the case cited above as subject matter . A detailed reply letter furnished as per the directions issued by your office. Further your office made observations related to deduction claimed under section 54 F of the Income Tax Act 1961.
ITA 104 /CHD/2021 A.Y. 2015-16 Page 11 of 25
It is submitted that the assessee sold capital assets during the relevant financial year i.e. 2014-2015 . The total consideration amount further reinvested in a residential house and claimed deduction under section 54F of the Income Tax Act 1961 . The assessee is having only one residential house No. 3420, Sector-27-C Chandigarh , during the relevant financial year in question i.e. his place of residence declared in his income tax return for the A.Y 2015-16. There is no other residential house in his name. Therefore the assessee has correctly claimed deduction under section 54F of the Income Tax Act 1961 . It is requested to acknowledge the above stated fact and in light of above do the needful in the interest of justice. Regards (On behalf of Mahesh Chugh) Sd/- (Arvind Mehta) Advocate Counsel 5.5. The reply at page 28-30 of the Paper Book to the Show Cause Notice issued by the ld. PCIT extracted in the impugned order appended at Paper Book page 24-25 was referred to. It was his submission that the reply was more or less as submitted before the AO. It has been made available on behalf of the assessee by Shri Arvind Mehta.
Details of the expenses of construction/renovation of House No.3113 Sector 28D alongwith evidences is available at pages 31 to 45. Linking these with the Index of specific party/nature of work etc. at pages 31, it was his submission that all details were available and most of the payments were made by cheques. Copy of the bank account is appended at pages 32 to 39, Paper Book page 40, it was highlighted is copy of the ledger account of Topsell Agencies from where certain purchases for the material used were made amounting to Rs. 1,33,040/-. Referring to the said page, it
ITA 104 /CHD/2021 A.Y. 2015-16 Page 12 of 25 was submitted that it clearly mentions the sales bill, VAT amounts. Similarly Paper Book page 41 is payments made for purchase of ceramic tiles, bill raised by Vishal Trading on 21.09.2014 and 14.01.2015 (Paper Book page 41-42).
Payments made for plumbing and labour thereon amounting to Rs. 1,15,000/- paid is supported by document available at page 43. Payment is made to “Papu” whose Mobile No. is 9417084590. Similarly at Paper Book page 44, the payment made for the person who has laid down the tiles. The Contractor’s name is “Shambhu Prajapati” with his Mobile No. 9653125313 as mentioned therein. Payment made of Rs.1,72,000/- for civil work to “Rahul Kumar” where his UP Mobile numbers as 8968262987 and 6239561207 are given to the ld. PCIT. The bills for purchase of material from J.S.
Building Store, Rajiv Bros., Sarmukh Iron Store and Manish Iron Store are available as payments going through these bank accounts. The ld. PCIT, it was submitted, does not fault any of these evidences, does not care to examine anyone of these persons and straight away arbitrarily on suspicion proceeds to setting aside a validly passed assessment order without caring to point out any error, let alone such an error which is prejudicial to the interests of the Revenue.
ITA 104 /CHD/2021 A.Y. 2015-16 Page 13 of 25 5.6 Arguing alternatively it was submitted, as per record assessee claimed the benefit of only Rs.2.11 Crore as against the entitled benefit of Rs.2.17 Crore and all of it was applied for the new purchase. Hence, in whatever manner the department wants to argue the claim on facts was allowable and has been allowed after due enquiry. No infirmity in the same is pointed out except for suspicions, those also not based on any facts.
6. In the said background, reliance was placed on various decisions including the case of Hari Iron Trading Co. vs. CIT 263 ITR 437(P&H), ITO vs. D.G. Housing Projects Ltd. 343 ITR 239 (Delhi), Director of Income Tax vs. Jyoti Foundation357 ITR 388 (Delhi), PCIT vs. Delhi Airport Merto Express (P.)Ltd. 398 ITR 8 (Delhi) Abhimanyu Gupta vs. Pr.
CIT to support the prayer that the order may be quashed.
6.1. Specific attention was invited to the decision of the Hon'ble Delhi High Court in the case of Delhi Airport Metro Express Pvt. Ltd. (supra) specifically for the proposition that in order to set aside the asse ssment order exercising the powers vested by Section 263 of the Act, it is incumbent upon the ld. PCIT to point out the errors in the order. Referring to the said decision specifically and the ITA 104 /CHD/2021 A.Y. 2015-16 Page 14 of 25 other decisions cited, it was submitted that this power cannot be exercised carelessly and whimsically.
6.2 Attention was also invited to the decision of the Hon'ble Delhi High Court in the case of D.G. Housing Projects Ltd. (supra) for the proposition that the ld. PCIT considering the evidence has to upset the same and When all the evidences are available before the ld. PCIT, he cannot whimsically direct that further enquiries be made.
It was argued that the law requires the ld. PCIT to address the evidences and not proceed on suspicions. It was questioned what stops the PCIT from carrying out an enquiry and point out what is wrong in the evidence available. The order, it was submitted, is contrary to law and facts.
6.3 Decision of the Hon'ble Delhi High Court relied upon at Sr.No. 3 in the case of Jyoti Foundation (supra) was cited. It was submitted that even in a case where the ld. PCIT makes out a case that it is possibly a case of inadequate enquiry which in the facts of the present case, it is not so, even then the ld. PCIT for exercising the powers u/s 263 is duty bound to point out what is the error which has occurred on account of inadequate enquiry, if so alleged.
ITA 104 /CHD/2021 A.Y. 2015-16 Page 15 of 25 6.4 The decision of the Chandigarh Bench in the case of Abhimanyu Gupta (cited supra)referred to at Sr.No. 5, it was submitted, is also relied upon again for a similar proposition.
6.5 It was his submission that in case the Revenue seeks to support the order on the reasoning that the AO has not discussed the specific facts in the order. For the said purposes, it was his submission that he would re ly upon decision of the jurisdictional High Court in the case of Hari Iron Trading Co. 263 ITR 437 and drew specific attention to page 444 of the same.
Accordingly, it was his submission that on facts and law, the order passed by the PCIT may be set aside.
The ld. CIT-DR supporting the order submitted that the order passed by the ld. PCIT after considering the facts and circumstances is a valid order in the eyes of law. Details of expenses sought to be relied upon by the assessee before the PCIT, it was submitted, need to be taken into consideration and verified. The AO, it was submitted, is empowered and has adequate support to carry out enquiries and merely be cause the order is set aside, no grievance can be said to be caused to the assessee as whatever the assessee wants to say, he is still
ITA 104 /CHD/2021 A.Y. 2015-16 Page 16 of 25 at liberty to argue and place its case before the AO. The ld. CIT-DR further submitted that the case law relied upon is not relevant as facts have not been considered and discussed in the assessment orde r. It is seen on record that some calculations have been made available by the Revenue as per letter dated 16.09.2021 whe rein the following calculation is given :
Thus to work out the deduction u/s 54F(l)(b), three ingredients required to be considered are : i) Net consideration in respect of the original asset; ii) Capital Gains; and iii) Cost of the new asset In the present case these are as under: i) 2,96,25,000/- ii) 2,00,87,010/- iii) 2,17,35,000/- Considering the above figures and by applying the formulae as provided in clause (b) of sub section (1) of Section 54F of the Act, the permissible deduction comes to Rs. 1,47,37,254/- as against claimed and allowed at the time of assessment at Rs. 1,85,85,741/-.”
8.1. The ld. CIT-DR sought time to verify the calculations and consult from the field as to what is the exact figure in dispute; he submitted that arguments of the Revenue are concluded; however, time for factual verification was sought.
Accordingly, time was granted.
On the next date, following submissions were filed on behalf of the Revenue :
ITA 104 /CHD/2021 A.Y. 2015-16 Page 17 of 25
Feb. 2. 2022 The Hon'ble Members Chandigarh "B" Bench Chandigarh Sir/madam, Reg, M/s Mahesh Chugh AY 2015-16 The above case was part heard today {2.2.2022}, and now fixed on 9.2.22, the undersigned would like to furnish capital gains calculations for ready reference. The same is as under:
Sr. no. Property ID Capital Sales Cost of gains/loss consideration Acquisition (Rs.) Indexation (Rs) (Rs.) 1 Plot F-264 45,00 000 (-)364223 4864223 2 Plot 182/49 155,00,000 12891083 2608917 3 Shop no. 13-14 96 25 000 7560150 2064850
Not included for the time being, the matter will be taken separately. Net consideration from Property 2&3 above : 2,51,25,000 (1,55,00,000)+ 96,25.000) Capital gains : 2,04,51,233 (1,28,91,083 + 75,60,150) {A} Investment in residential property (3113) : 2,27,50,000 (including 10,15,000 renovation
Deduction eligibility : Investment in residential property x capital gains/net consideration
Here : 2,27,50.000x2.04,51,233/2,51,75,000 = 1,85,18,031 Capital gains of property 2&3 after deduction : 19,33,202 (2,04,51,233-1,85,18,031) Net capital gains after deducting loss of Property no, 1 : 15,68,979 (19,33,202-3,64,223) Claim of Assessee in his computation : 15.01,269 Difference : 67,710 (assessee may correct the figure) (B) Investment in resl. Property (3113) taken at Rs. 2,17,35,000 (without renovation claim of 10,15,000)