SHRI ARUN KUMAR AGGARWAL,NEW DELHI vs. CIT, NEW DELHI

That the order u/s 263 dated 26th March 2012 passed by the Ld. Commissioner of Income Tax is without jurisdiction, not good in law and void, as the order u/s 143(3) dated 30th December 2009 was neither erroneous nor prejudicial to the interest of the revenue.

That the Ld. Commissioner of Income Tax, Central-II erred in law as well as in facts in setting aside the order u/s 143(3) dated 30th December 2009 and directing the Assessing Officer to modify the assessment order in light of the directions stated in his order u/s 263, and his such direction is bad in law and void and contrary to the provisions of law, as the assessment order u/s. 143(3) was neither erroneous nor prejudicial to the interest of the revenue.

Without prejudice to the above, The Ld. Commissioner of Income Tax erred in law as well as in facts in holding that the Assessing Officer accepted the sale consideration as declared by the assessee on the sale of Property at Village Shorkha (Dadri), without appreciating the relevant statutory provision of the Income Tax Act, are based on his surmises and guesses and are contrary to the provisions of law.

The Ld. Commissioner of Income Tax erred in law as well as in facts in holding that the A.O. in his assessment order has allowed the claim of brought forward Long term capital loss of Rs.36,75,100/-, without any verification, examination and application of mind, are based on his surmises and guesses and are contrary to the provisions of law.

The Ld. Commissioner of Income Tax erred in law as well as in facts in holding that the A.O. in his assessment order has allowed the claim of Long term capital gain on sale of shares of Rs.5,00,000/-, without any verification, examination and application of mind, are based on his surmises and guesses and are contrary to the provisions of law. Briefly stated assessee is an individual who filed its return of income on 04/01/2008 declaring income of Rs. 2 981168/–. Assessment under section 143 (3) was passed on 30/12/2009 assessing total income at Rs. 3 004367/–.” On examination of the assessment record the Ld. CIT observed that the 3. assessment order passed by the Ld. assessing officer is erroneous as well as prejudicial to the interest of the revenue for the reason that assessee has shown long-term capital gain on sale of certain properties and adjusted the long term capital loss claimed to have been incurred by assessee in preceding previous year. Furthermore with respect to the capital gain on sale of property at village Shorkha ( Dadri) the assessee shown sale consideration of Rs. 10 Lacs whereas the value of the property taken for the stability purpose was Rs. 58.75 Lacs and therefore the provisions of section 50 C of the income tax act were not look into by the Ld. assessing officer while framing original assessment order. Before the Ld. CIT assessee pleaded that land in question was located in flood prone area and there was no market value of that property of that particular land at that particular time as the rate at which the land is sold was the fair market value at the time of sale and the valuation as per the stem valuation authority cannot be taken as the fair market value for working of the capital gain of that property. Ld. CIT rejected the contention of the assessee and has held that neither the assessing officer has raised this issue no the assessee has made any submission on this issue during the course of assessment proceedings therefore the provisions of the section 50 C have been overlooked during the course of assessment proceedings and he held that order of the Ld. assessing officer in not adopting the fair market value according to the stamp duty authorities as it exceeds the sale consideration is an error in the assessment order and it is prejudicial to the interest of the revenue. With respect to the set off of brought forward long-term capital losses it was found by the Ld. CIT that assessee in the return of income has claimed set-off of long term capital loss of Rs. 3675100/-in assessment year 2006.07 however same was not declared in the return filed by the assessee in form number 2D. Further the documents filed by the assessee during the course of assessment proceedings for assessment year 2007-08 shows that the alleged losses on account of sale of agricultural land at Haryana which is not chargeable to tax as per the provisions of section 2 (14 ) of the income tax act. Therefore, it was observed by the Ld. CIT that the Ld. assessing officer did not consider this before allowing the assessee's contention for the set-off of the above loss. In response to the show cause notice the assessee submitted that there is no quarrel provided under form number 2D well-placed carried forward loss can be shown and further same was disclosed in the return of income for assessment year 2006 2007 through the computation of income Annexure of capital gain or loss which were part of the return of income. He further submitted that according to the map of municipal area from the official website of municipal Corporation, Gurgaon, the land is situated within the 8 km from limits of that principle corporations therefore it is not an agricultural land. The Ld. Cit rejected the contention of the assessee as the map was downloaded on 10 and 2011 whereas the assessee in FY 2000 506 sold the land when Gurgaon was principal council. Therefore Ld. CIT held that this issue was not examined by the Ld. assessing officer during the course of assessment proceedings then the assessee has also failed to substantiate the same during the course of present proceedings therefore the order passed by the Ld. assessing officer allowing the claim of brought forward capital loss to the assessee without any verification, examination and application of mind is erroneous and prejudicial to the interest of the revenue. With respect to the sale of shares of Satnam Haegens Limited for Rs. 5 Lacs the Ld. CIT noted that assessee has claimed capital gain arising on sale of those shares is exempt under the provisions of section 10 (38) of the income tax act however in case of the assessee the security transaction tax has not been paid on the import transaction which is apparent from the fact that the entire difference of amount between the sale consideration and cost of acquisition has been shown as profit. Therefore the claim of the assessee of the exemption on capital gain arising on sale of those shares was also accepted by the Ld. assessing officer without verifying whether it complies with the provisions of section 10 (38) of the income tax act and therefore the order passed by the Ld. assessing officer is erroneous and prejudicial to the interest of the assessee is the issues were not investigated, verified and examined by the assessing officer during the course of assessment proceedings. Based on this finding the Ld. CIT passed order under section 263 of the income tax act on 26/03/2012. The assessee challenges this order before us in this appeal. The Ld. AR submitted before us that order passed by the Ld. assessing 4. officer is neither erroneous nor prejudicial to the interest of the revenue is it was passed with due application of mind and after proper Inquiry. He submitted that capital gain on sale of property at village shorkha was sold for Rs. 20 lakhs and being 50% share of the assessee the sale consideration was taken at Rs. 10 Lacs by filing return of income. He admitted that the sale deed the value of the property taken for the stem duty purpose was Rs. 58.75 lakhs however the stamp duty rates cannot be applied to the facts of the cases of the sale of the land because the property was situated in flood prone area and for this he referred to page No. 71 to 73 of the paper book which is a valuation report submitted by the approved valuer valued the property is 19.97 lakhs stating that the said land is situated in water logging area low-lying area so that the land rate is lower than the other land. He further referred to the page No. 38 of the paper book which is a inquiry letter dated 13/07/2009 issued by the Ld. assessing officer before framing the assessment under section 143 (3) which is subject to challenge under section 263 of the income tax act. He referred to para No. 2 of that letter wherein the sale deed in respect of immovable property sold was asked for. The Ld. authorized representative also stated that the stem valuation date is not applicable to the land sold for the reasons stated by him before the Ld. CIT With respect to the set off of brought forward long-term capital loss it was submitted by him that this issue was also examined by the assessing officer wide serial No. 3 of the query letter dated 13/07/2009 which is placed at page No. 38 of the paper book. He further submitted that same was included in the computation of total income filed by the assessee for assessment year 2006 – 07. He further submitted that the said land is not an agricultural land as it is situated within the 8 km of the radius of the principal Corporation and further the Tehsildar submits him that certificate dated 07/04/2015 also proves this fact. Therefore the land sold in the previous year was not an agricultural land and was chargeable to tax and therefore the loss incurred by the assessee in assessment year 2006 – 07 was rightly allowed set-off in assessment year 2007 – 08. Therefore, he submitted that there is no error in the order of the Ld. assessing officer. With respect to the sale of shares will be exemption was claimed under section 10 (38) of the income tax act he submitted that the Ld. assessing officer has asked for this detail wide para No. 4 and 5 of the query letter. Therefore he submission was that that the order has been passed after due enquiry and hence cannot be said to be erroneous and prejudicial to the interest of the revenue. The Ld. departmental representative vehemently supported the order of 5. the Ld. CIT and submitted that order passed by the assessing officer was without any enquiry. He submitted that query letter issued by the Ld. assessing officer was just obtaining documents and the Ld. assessing officer has not examined all carried out any Inquiry on those documents and therefore the order passed by the Ld. assessing officer is erroneous and prejudicial to the interest of the revenue. He therefore submitted that order passed by the Ld. CIT is in accordance with law.