SH. JATINDER SINGH,,DELHI vs. ITO, NEW DELHI

Per L.P. Sahu, Accountant Member:

This is an appeal filed by the assessee against the order of Principal

Commissioner of Income-tax dated 04.03.2016 passed u/s. 263 of the Income-

tax Act, 1961 (in short “the Act”) for the assessment year 2012-13 on the

following grounds :

“1. That order passed u/s 263 of the Income Tax Act, 1961 by the Ld. Principal Commissioner of Income Tax, Delhi-16 is against law and facts on the file in as much as the Ld. Principal Commissioner of Income Tax was not justified to hold that the assessment order passed by the Ld. Assessing Officer dated 02.02.2015 was erroneous in so far as prejudicial to the interest of the Revenue.

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Chowkhandi, New Delhi, whereas the same was discussed in detail during assessment proceedings.

completed u/s. 143(3) of the Act on 02.02.2015 at an income of

Rs.24,52,449/- as against returned income of Rs.19,77,810/- after making

disallowance of Rs.2,09,493/- on account of expenses incurred for non-

business purpose, Rs.2,65,240/- on account of unverifiable freight charges

and Rs.29,656/- on account of MCD Tax. Subsequently, the ld. CIT called for

the assessment records and examined the same. On examination, the ld. CIT

observed that the order passed by AO u/s. 143(3) dated 02.02.2015 is

erroneous in so far as it is prejudicial to the interest of revenue, as the

Assessing Officer failed to apply his mind on the following issues which

emerged from the assessment records :

(i). Investment made in the purchase of property at DLF City, Gurgaon. (ii). Profit on sale of property at 22 Chowkhandi, New Delhi. (iii). Non declaration of rental income from the residential properties. (iv). Non-examination of the issue relating to payments made to transporters without deduction of TDS as per section 194C(6) of the Act.

3 ITA No.2184/Del./2016

On the premise of above issues, the ld. CIT issued show cause notice to the

assessee u/s. 263 of the Act dated 16.03.2015, as reproduced in the impugned

order and being satisfied with the reply of assessee on issue No. (i) above,

dropped the said issue for revision of the assessment order. However, on the

remaining three issues, the ld. CIT revised the order of the AO holding that

there is complete lack of examination and application of mind by the AO.

Aggrieved, the assessee has brought the matter before the Tribunal by means

of this appeal.

through the entire record available before us.

profit earned on the sale of property at 22 Chowkhandi, New Delhi. It revealed

from the record that the assessee purchased this property for a consideration

of Rs.40 lacs vide sale deed dated 13.03.2008 and was sold for a consideration

of Rs.84,56,000/- vide sale deed dated 18.11.2011. The ld. CIT mentioned that

as per purchase deed, the purchase cost has been computed by taking the cost

of land at Rs.16100/- per Sqm. and the total cost of 200 Sq meters of land

works out to Rs. 32,20,000/-. The cost of construction has been taken @

5600/- per sqm and the cost of 130 sqm works out to Rs. 7,28,000/-. The total

cost of the property at Circle Rate comes to Rs. 39,48,000/- and the property

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was registered at Rs. 40 lacs. Similarly as per the sale deed the cost of the land

has been taken at Rs. 38,640/- per sqm and the cost of 200 sqm of land works

out to Rs. 77,28,000/-. The cost of construction has been taken at Rs.

7,28,000/- at the same rate of Rs. 5600/- per sqm. The total cost at Circle Rate

has been computed at Rs. 84,56,000/- and the sale of property has been

registered at Rs. 84,56,000/- only. The ld. CIT further observed that on

comparison of both the sale deeds, the construction cost has been taken to be

the same and the increase in the property was only due to increase in the cost

of land from 16100/- to 38,640/-. However, from the ledger account of this

property submitted before the Assessing Officer, it reveals that the assessee

has shown construction expenses of Rs.42,62,300/- during the period April

2011 to July 2001 showing profit on sale of property amounting to

Rs.1,93,700/-. It was also observed that the construction expenses of

Rs.42,62,300/- claimed to have been made by assessee would have also

certainly increased the cost of the property at circle rate and the ld. Assessing

Officer has not examined and applied his mind to this aspect while accepting

the declared profit from this property of the assessee. The contention of the

assessee has been that the investment in the property, expenses on

construction/renovation were duly recorded in the books of accounts and the

profit earned on the sale of this property of Rs.1,93,700/- forms the part of

computation of taxable income returned by the assessee. All these

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transactions were examined by the AO and hence, the ld. CIT is not justified to

take a diverse view on the issue.

the assessee has failed to rebut the specific point emerged from the show

cause notice that the cost of property at circle rate was shown to have

increased due to increase in cost of land only and the construction expenses

amounting to Rs.42,62,300/- would have also increased the cost of property

at circle rate and this aspect of the issue has not been examined by the AO and

there was complete non-application of mind on its part with regard to correct

profit earned on the sale of this property. We, therefore, conclude that the ld.

CIT has rightly directed the AO to examine the issue relating to sale cost of the

property at circle rate by taking into account the construction expenses of

Rs.42,62,300/- claimed by assessee and also to examine the sources of these

expenses and then to compute the correct profit earned by the assessee on the

sale of this property. Accordingly, this issue is decided in favour of the

Revenue and against the assessee.

the residential properties owned by the assessee. The ld. CIT observed that

the Assessing Officer has neither examined nor applied his mind to the facts

on record that the assessee owned three residential properties and was

required to declare income from house property from at least two residential

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properties by considering one property to be self occupied. The contention of

the assessee in response to the notice u/s 263 of the I.T. Act, 1961 has been

that one property at DLF was purchased in December 2011 and assessee did

not get any benefit out of the same. One property at Vikas Puri is self occupied

by the assessee and the third property which is flat at Vikas Puri is used by the

employees and the drivers for night stay and for taking rest. The ld. CIT was

not satisfied with this reply observing that even if the first property was

purchased in December, 2011 the assessee was required to declare the rental

income from December 2011 onwards. As regards the 3rd property being flat

at Vikas Puri the property being used by the employees for night stay or for

taking rest does not absolve the assessee for declaring his rental income. He,

therefore, directed the AO to examine the issue regarding non-declaration of

income from house properties and to pass the assessment order afresh after

giving reasonable opportunity of being heard to the assessee. We find no

rebuttal of the finding of ld. CIT that purchase of first property in December,

2011 and third property being used by employees and drivers does not

absolve the assessee from declaring his rental income from these properties,

as no evidence is there on record to establish that the employees/drivers

were using the property free of cost. We find that the issue relating to income

from house property has not at all been dealt with by the Assessing Officer in

the assessment order and there being complete lack of examination and

7 ITA No.2184/Del./2016

application of mind on this issue, the ld. CIT, in our opinion, has rightly

restored the issue to the AO for adjudication. Accordingly, this issue is also

decided against the assessee.

made by assessee to various vehicle owners for want of furnishing their PAN.

The ld. CIT found that in the profit and loss account, the assessee claimed

freight expenses of Rs.20,72,15,885/-. It was also found that no TDS was

deducted on the payment of freight made by assessee to vehicle owners and

since the assessee did not furnish the PAN of the persons receiving the freight,

the AO was required to disallow these expenses. The contention of the

assessee has been that the details of PAN numbers of the vehicle owners are

available with the assessee and can be produced. It was also stated that almost

all the individual transactions are below Rs.30,000/- and are covered u/s.

194C(5) of the Act and the provisions of section 40(ia) are not applicable to

these transactions. The ld. CIT rejected the contentions of the assessee, as the

AO neither examined this issue at all nor applied his mind thereto. He also did

not ask for the PAN details of the persons to whom the impugned freight was

paid by the assessee. We do not find any substance in the contentions of the

assessee, as the ld. Counsel for the assessee has failed to rebut the findings of

the ld. CIT that the AO was required to address on this issue and examine the

8 ITA No.2184/Del./2016

same in view of the relevant provisions of the Act, which is completely lacking

in the instant case. The AO even has not required to the assessee to furnish the

PAN details of the recipients of freight. The contentions made by the assessee

need examination and verification at the assessment stage. We, therefore,

endorse the view taken by the ld. CIT and support the direction to the AO to

decide the issue in accordance with law after giving reasonable opportunity of

being heard to the assessee. Therefore, this issue also goes against the

assessee.

impugned order u/s. 263 of the Act, being legally invalid. In support, he has

relied on the following decisions :

(i). CIT vs. Gabreil India Ltd., 203 ITR 108 (Bom) (ii). CIT vs. Arvind Jeweller, 259 ITR 502 (Guj) (iii). CIT vs. Sunbeam Auto Ltd., 332 ITR 167(Del.) (iv). CIT vs. Mc Dermott International Inc., 302 ITR 268 (Uttarakhand) (v). CIT vs. DLF Ltd. 350 ITR 555 (Del.)

with the conclusions reached by primary authority in the assessment order,

this will not constitute that the order of the primary authority was erroneous

in so far as prejudicial to the interest of Revenue as held in several decisions

cited above. We do not find substance in the contention of the assessee. In the

instant case, we find that there was complete lack of examination/enquiry and

application of mind on the part of Assessing Officer while framing the

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assessment order on the issues pointed out by the Revising Authority. Such

failure on the part of the AO makes the assessment as erroneous in so far as

prejudicial to the interest of Revenue. As already noted, some of the issues

have even not been addressed in the assessment order. No such situation

arose in the decisions relied by the assessee, hence, the same do not render in

support to the assessee in the instant case. Even otherwise, incorrect

assumption of facts and incorrect application of law go to satisfy the

requirement of the order being erroneous. We, therefore, find that the order

passed by the ld. CIT is legally valid.

Order pronounced in the open court on 13.01.2017. Sd/- Sd/- (I.C. SUDHIR) (L.P. SAHU) Judicial Member Accountant Member

Dated : 13.01.2017 *aks/- Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant. Registrar Income Tax Appellate Tribunal Delhi Benches, New Delhi