UDAY KUMAR VAISH,NEW DELHI vs. CIT, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘D’, NEW DELHI Before Sh. N. K. Saini, AM and Sh. Lalit Kumar, JM ITA No. 5700/Del/2014 : Asstt. Years : 2009-10 Uday Kumar Vaish, Vs Commissioner of Income Tax, 52/79, Ramjas Road, Karol Bagh, Central-II, New Delhi-110005 New Delhi (APPELLANT) (RESPONDENT) PAN No. AAIPV1716G Assessee by : Dr. Rakesh Gupta & Somil Agarwal, Adv. Revenue by : Sh. Kartar Singh, CIT DR Date of Hearing : 29.11.2016 Date of Pronouncement : 30.11.2016 ORDER Per N. K. Saini, AM: This is an appeal by the assessee against the order dated 06.03.2014 of ld. CIT, Central-II, New Delhi u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act).

ITA No. 5700/Del/2014 2 Uday Kumar Vaish bonafide belief that since assessment has been set aside, there is no cause of action against the order u/s 263. Later on, in the month of September, 2014 when the appellant was pursuing his appeal matter before ITAT came to know about the legal consequence of the order passed by CIT u/s. 263. Accordingly, the appellant contacted the Chartered Accountant, Sh. Tarandeep Singh, and he was made aware about the consequences and about the valuable right to file the appeal accruing to the assessee. Accordingly the appeal was filed. There is a good and sufficient reason for the delay which may please be condoned as was condoned in the case of M/s Sheena Exports in ITA 6001/Del./2013, Date of order 15-10- 2014. (ITAT, Delhi). Reliance is further placed on the judgment of Collector, Land Acquisition vs Mst. Katiji & Others 167 ITR 471 (SC). I shall be obliged. Thanking You, Yours Faithfully, Sd/- (Uday Kumar Vaish) 3. During the course of hearing the ld. Counsel for the assessee reiterated the contents of the aforesaid application and submitted that similar delay was there in case of M/s Sheena Exports Vs CIT(Central), Gurgoan in ITA No. 6001/Del/2013 wherein the delay has been condoned vide order dated 15.10.2014 (copy of the said order was furnished which is placed on record).

ITA No. 5700/Del/2014 3 Uday Kumar Vaish 4. In his rival submissions the ld. DR opposed the application for condonation of delay and submitted that the delay may not be condoned as the assessee was assisted by a professional Chartered Accountant and the claim of ignorance of law is not factually correct.

“5. Rival contentions heard. This is a case, where the assessee has been pursuing remedies against the order of the revenue authorities. It is not a case whether the assessee has given up his case at any stage. No doubt the assessee is guided by professionals in its litigation. This does not mean that there could be a mistake on the part of assessee or its counsels interpreting the order of the Ld.CIT(A) u/s 263 in coming to a conclusion that they could agitate the addition in question before the AO in the fresh assessment proceedings consequent to the said original assessment order. It was only when they did not find any success before the Ld.CIT(A), the instructing Counsel contacted Dr. Rakesh Gupta who specialized in arguing the matters before the High Court and the Supreme Court and when the case was discussed in the conference, Dr. Rakesh Gupta brought to the notice that a mistake occurred in not carrying out the order of Ld.CIT U/s.263. It was advised that in addition to

ITA No. 5700/Del/2014 4 Uday Kumar Vaish the appeal filed against the order passed by the Ld.CIT(A) Central Gurgaon in the order dated 11.09.2013, this appeal was filed with the petition for condonation of delay. It can be noticed that the CIT(A) Central Gurgaon passed his order on 11th September,2013 and it is on 7th Nov.2013 that the assessee filed an appeal challenging not only the order passed by CIT(A) Gurgaon on 11.09.2013 but also the order passed by CIT, Central Gurgaon Us. 263 on 19.02.2012. In our considered view the assessee has explained the delay. 5.1. The Hon`ble Supreme Court in the case of Collector, Land Acquisition vs. MST Katija & others (supra) has held as follows: “1. Ordinarily, a litigant does not stand to benefit by lodging an appeal late. 2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. 3. Every day’s delay must be explained does not mean that a pedantic approach should be made. Why not every hour’s delay, every second’s delay? The doctrine must be applied in a rational common sense and pragmatic manner. 4. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.

ITA No. 5700/Del/2014 5 Uday Kumar Vaish 5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. 6. It must be grasped that the judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.” 5.2. Coming to the numerous decisions relied upon by the revenue, we find that each one of them are based on the peculiar set of facts of that case and these are distinguishable. i. In the case of Madhu Dadha vs. ACIT (Mad.) the Tribunal was not satisfied that there was sufficient cause for not bringing the appeal within stipulated time for the reasons given therein. ii. In the case of Banwarilal and Sons Pvt.Ltd. vs. UOI and others (Del) AIR 1973 Delhi 24, the Hon’ble Supreme Court has laid down that the assessee has explained the delay made day by day. It is also stated that he has to show that he was not guilty of “want of bonafides in action for negligence”. This was a case where the appellant failed to explain the delay on either of the two grounds urged by him. iii. The Hon’ble Supreme Court in the case of Ramlal, Motilal and Chhotelal(supra) held as under. “In an application u/s 5 of the Indian Limitation Act for condonation of one day’s delay in filing an appeal, the question arose whether the appellant had to explain his conduct during the whole period prescribed for filing the appeal or he has to explain the delay between the last day for

ITA No. 5700/Del/2014 6 Uday Kumar Vaish filing the appeal and the date on which the appeal was actually field. Section 5 of the Limitation Act lays down that an appeal may be admitted after the period of limitation if the appellant shows sufficient cause for not preferring the appeal “within such period.” Held, that it would be irrelevant to invoke general considerations such as diligence of the appellant in construing the words of Sec.5. The expression “within such period” does not mean during such period and the failure of the appellant to account for his non diligence during the whole period of limitation does not disqualify him from praying for condonation of delay. In showing sufficient cause for condoning the delay the appellant has to explain the whole of the delay covered by the period between the last day of limitation and the date on which the appeal was actually filed”. iv. In the case of J&K Small Scale Industries Development Corporation Ltd. vs. ACIT (supra) the Tribunal came to a conclusion that the assessee has suppressed material facts and that it did not approach the Courts with clean hands. 5.3 As already stated in the case on hand the assessee has shown a sufficient cause and reason to explain the whole of the delay covered by the period between the last day of limitation and the date on which the appeal was actually filed. In fact the assessee was pursuing the legal remedy throughout the period and it was a case of pursuing the wrong remedy. In the result we condone the delay in question and admit the appeal.” 6. So, respectfully following the aforesaid referred to order dated 15.10.2014, delay is condoned and the appeal is admitted. 7. The only grievance of the assessee in this appeal relates to the jurisdiction of the ld. CIT, Central-II, New Delhi assumed u/s 263 of the

ITA No. 5700/Del/2014 7 Uday Kumar Vaish Act. During the course of hearing the ld. Counsel for the assessee at the very outset stated that the facts of the present case are identical to the facts involved in the case of wife of the assessee, Smt. Maya Gupta Vs CIT, Central-II, New Delhi in ITA No. 5701/Del/2014 for the assessment year 2009-10 order dated 08.07.2015. It was stated that the ld. CIT passed the verbatim order in the case of the assessee as was done in the case of Smt. Maya Gupta (supra) and the facts of the assessee’s case are identical to the facts involved in the said case. It was also pointed out that the aforesaid order dated 08.07.2015 in the case of Smt. Maya Gupta in ITA No. 5701/Del/2014 (supra) has been affirmed by the Hon’ble Jurisdictional High Court in ITA No. 152/2016 vide order dated 02.09.2016 (copies of the aforesaid orders were furnished which are placed on record). 8. In his rival submissions the ld. DR although supported the impugned order of the ld. CIT but could not controvert the aforesaid contention of the ld. Counsel for the assessee. 9. We have considered the submissions of both the parties and carefully gone through the material available on the record. It is noticed that the facts of the present case are similar to the facts involved in the case of wife of the assessee Smt. Maya Gupta Vs CIT (supra). In the said case the order of the even date passed by the ld. CIT in similar circumstances was quashed and the relevant findings have been given in paras 16 to 34 which read as under:

ITA No. 5700/Del/2014 8 Uday Kumar Vaish “16. On careful consideration of above submissions and vigilant and careful perusal of relevant material placed before us, at the outset, we find it appropriate to deal with legal contention of the assessee that the impugned assessment order was passed by the AO with prior approval of higher authority i.e. Addl. Commissioner in terms of section 153D of the Act and therefore in view of various judicial pronouncements and judgments, jurisdiction u/s 263 of the Act cannot be validly assumed and invoked by the CIT. To support this legal proposition, ld. counsel of the assessee has placed reliance on the orders of the Tribunal in the case of Goyal Iron & Steel Works (India) vs. Commissioner of Income Tax(supra, Mehta Cut Piece Cloth House vs. Income Tax Officer (supra), Income Tax Officer vs. Arora Alloys Ltd. (supra). 17. Replying to the above, ld. DR has submitted that the ratio of these decisions is not applicable to the facts and circumstances of the present case and ACIT who gave approval u/s 153D of the Act for passing assessment order u/s 143(3) r/w section 153C of the Act is not equivalent to the position of CIT in the hierarchy of the department, therefore, the impugned assessment order was very well within the valid jurisdiction of the CIT for invoking provisions of section 263 of the Act. 18. On careful consideration of orders of the Tribunal as related by the ld. counsel of the assessee and provisions of section 153D of the Act and hierarchy of the income tax department, we are of the considered view that admittedly, the impugned assessment order which was demolished by the CIT by invoking provisions of section 263 of the Act was passed with prior approval of ACIT, Central Range-2, New Delhi vide F.No.153A-03-Mahesh Mehta/11-12/607 dated 28.12.11. The CIT in any terms cannot be equated with ACIT because CIT holds higher position in the hierarchy of the department. In

ITA No. 5700/Del/2014 9 Uday Kumar Vaish this situation, benefit of the ratio of the orders of the Tribunal as relied by the ld. counsel of the assessee is not available and hence legal contention of the assessee is hereby jettisoned. 19. Coming to the issue as alleged by the CIT in the notice issued to the assessee u/s 263 of the Act (supra), we note that as per third proviso to section 24(b) of the Act, no deduction shall be made under the second proviso unless the assessee furnishes certificate from the person to whom interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of property was conversion of the whole or in part of the capital borrowed which remains to be repaid as a new loan. Meaning thereby that for making claim u/s 24(b) of the Act, a certificate specifying the amount of interest payable by the assessee has to be submitted before the AO. From careful reading of section 24 and all three proviso attached to this provisions, we note that there is no mentioning of any proforma on which required certificate has to be given. In absence of any prescribed proforma, the amount of interest payable may be substantiated by way of furnishing a normal certificate, statement of loan account and other supportive evidence or details pertinent to payment of interest which was claimed as deduction u/s 24(b) of the Act. In the present case, the assessee furnished all required detail before the AO during assessment proceedings along with reply dated 2.12.2011 and 5.12.2011. From a reply dated 5.12.2011 we note that in para 1, the assessee has mentioned details of claim of interest and has submitted all necessary evidence in respect of interest paid along with this reply in the form of repayment schedule/copy of the bank statement with HDFC Bank. The AO during the assessment proceedings has made inquiry in this regard and after proper and reasonable verification and evaluation of explanation and supportive evidence, submitted by the assessee on this issue, allowed deduction to the assessee. The CIT has objected the allowance of deduction on the allegation

ITA No. 5700/Del/2014 10 Uday Kumar Vaish of non-furnishing of required certificate as per third proviso to section 24(b) of the Act but there is no conclusion of the CIT that the amount claimed by the assessee was either wrong or it was a bogus claim. During the proceeding u/s 263 of the Act, the assessee also furnished a letter confirming the full and final repayment of loan along with interest but it was properly considered by the CIT. 20. Under above noted facts and circumstances, we are of the view that under third proviso to section 24(b) of the Act, the assessee is required to submit a certificate for making claim of interest under this provision and there is no prescribed form of certificate. During the assessment proceedings on the specific query of the AO, the assessee furnished detailed explanation supported by repayment schedule, copy of the bank statement to substantiate its claim and the amount of interest has not been disputed either by the AO or by the CIT. In this situation, merely non-compliance of directory provisions of the Act cannot make assessment order as erroneous and prejudicial to the interest of revenue, especially when the claim of the assessee regarding interest u/s 24(b) of the Act is accepted as genuine and no incorrectness or infirmity has been brought out by the ld. CIT or any other revenue authorities therein. If for a moment it is accepted that order is erroneous on account of required certificate but at the same time, the same cannot be held as prejudicial to the interest of the revenue as the claim of interest paid by the assessee has not been alleged as bogus or not correct or not genuine by the ld. CIT. 21. Under above noted facts and circumstances, we are inclined to note that the view taken by the AO was a reasonable and plausible view which cannot be said as unsustainable or not in accordance with law and other

ITA No. 5700/Del/2014 11 Uday Kumar Vaish relevant provisions of the Act on the issue of allowability of deduction or interest paid by the assessee. 22. While considering the second issue of Rs.1 crore being unaccounted cash payment on purchase of property no. 56/7, Deshbandhu Gupta Road, Karol Bagh, New Delhi, from relevant part of the notice u/s 263 of the Act on this issue, we note that the CIT has raised and agitated this issue with following facts and observations:- “2.2.1 In para 5.3 page no. 2 of the assessment order the A 0 stated that "During the course of survey Sh. Uday Kumar Vaish admitted to purchase the property jointly with his wife Smt. Maya Gupta from M/s Honest Estates Pvt. Ltd. against Rs.4.51 crore consisting of 1st Floor, IInd Floor and IIIrd Floor with its terrace/roof rights. The registry was done of Rs. 2.51 crore whereas the amount paid to Sh. Mahesh Mehta on behalf of M/s Honest Estate Pvt. Ltd. was Rs. 4. 51 crore.” The same fact is repealed in a way or the other in the assessment order in para 5.4, page no. 2, in para 5.7 page no. 4. in para 5.8, page no. 4 etc. This is a clear case of concealed unaccounted transaction of Rs.1 crore (the other 1 crore shared by the assessee's husband), the source of which was not enquired & examined. 2.2.2 The assessee has furnished a statement of short term Capital Gain/ Long Term Capital Gain and accordingly arrived at a total Capital Gain of Rs. 1,40,00,057/- and offered unaccounted transaction of Rs.1 crore as part of income under: Capital Gain. The AO neither rejected the assessee's capital gain shown at Rs. 1,40,00,057/- nor he made a recomputation of the capital gain showing its afresh how he arrived 01 Rs. 40,00,057 - only but he simply took out 1 crore from the Capital Gain and placed it under the head "Income from Other Sources ". 2.2.3 It is to be noted that property situated at 56/7, D.B. Gupta was sold on 17.07. 2008 to Shri Mahesh Mehta and another property situated at 783/161. DB Road was purchased from Honest Estate (P) Ltd. on 11.07.2008. The date of sale of Property is subsequent to the date of purchase of property. This fact shows

ITA No. 5700/Del/2014 12 Uday Kumar Vaish that unaccounted cash payment of Rs. 2 crore on purchase of property cannot be set off against unaccounted receipt on sale of property. Both transactions are with different legal entities and purchase precedes sales. 2.2.4 While there is a clear Capital Gain statement furnished by the assessee showing it or Rs. 1,40,00,057/-, the AO's action in diverting 1 crore from the capital gain to income from other sources is not justified at all. 2.2.5 Simply diverting capital gain income to "Income from other Sources" does not imply taxing the unaccounted / concealed income of Rs.1 crore represented by cash investment in property purchased. The Capital Gain declared by the assessee with proper statement in no way can be reduced or overlapped considering the facts of this case. 2.2.6 Therefore. it is apparent that the assessment order passed by the A.O. is erroneous as well as prejudicial to the interest of the revenue as Rs. 1 crore being unaccounted cash payment on purchase of property no. 56/7, DB Gupta Rodd, Karol Bagh, New Delhi was not considered for taxation. ” 23. From the copy of the assessment order passed u/s 143(3)/153C of the Act, we note that the issue of unaccounted receipt from Shri Mahesh Mehta and issue of payment of unaccounted money to M/s Honest Estate (P) Ltd. has been dealt from para no. 5 to 5.8 elaborately. From the notices of the AO dated 30.6.11 along with letter (assessee’s paper book page 11 to 14), we find that during the course of proceedings, the AO showcaused the assessee asking question relating to search of Mr. Mahesh Mehta, details of all bank accounts of the assessee, properties and investment made, utilization of money and there is a specific query about the provisions of property no. 56/7, DB Gupta Road, Karol Bagh, involving the alleged unaccounted payment of Rs.2 crore out of which Rs.1 crore pertains to the assessee. We further observe from the copy of the assessee’s submissions dated 15.11.11filed before

ITA No. 5700/Del/2014 13 Uday Kumar Vaish the AO replying to the questionnaire and notice dated 30.6.11, the assessee submitted copies of bank account, statement of assets and liabilities and a detailed note on the properties purchased by the assessee and property sold during the period under consideration. In assessee’s paper book page 17 to 73, we observe that the assessee jointly purchased property no. 56/7, DB Gupta Road, with her spouse from M/s Honest Estates Pvt. Ltd. wherein three separate sale deeds have been executed in favour of the assessee, first sale deed was registered on 11.7.2008 and remaining two sale deeds were registered on 17.7.2008. From sale deeds pertaining to property bearing no. 783/160, 161 & 162, DB Gupta Road, New Delhi available from pages 74 to 171 of the asessee’s paper book, we note that the assessee and her husband jointly sold one property to Mrs. Anita Chhabra and her son Sitaksh Chhabra, another property to Mrs. Gurcharan Kaur and two parts of this property have been sold to Mr. Mahesh Mehta by getting registered sale deed in his favour on the same date i.e. 17.7.2008. 24. If we further analyse this issue, then we observe that as per statement of assessee’s husband Shri Uday Kumar Vaish recorded u/s 133 of the Act on 18.8.2009 at the time of survey of the assessee, we note that the husband of the assessee replying to question no. 6 at page no. 4 of the statement fairly admitted that a sum of Rs. 2 crore in cash on account of part of sale consideration of property no. 783/161 was kept by Mr. Mahesh Mehta as purchase consideration of newly purchased building at 56/7, DB Gupta Road, New Delhi purchased from him i.e. Mr. Mahesh Mehta himself, he was under the impression that no capital gain was to be invoked on this amount. However, in the subsequent part of the answer, assessee’s husband submitted that if this is the capital gain against his old building as a part of sale consideration, then he is ready to pay the capital gain tax on this amount subject

ITA No. 5700/Del/2014 14 Uday Kumar Vaish to no penalty proceedings just to buy peace. From the statement of short term and along term capital gain filed along with the return of income available at page 10 of the assessee’s paper book, we note that the assessee offered short term capital gain of Rs.4,18,200 on sale consideration of property at 783/162, Karol Bagh for half share. In the second part of this statement, we see that the assessee has offered long term capital gain accrued to her from sale consideration of three properties viz. 16C, Motia Khan, Paharganj, property no. 8750, DB Gupta Road, New Delhi amounting to Rs.1,35,81,857 and in the calculation of taxable income, income from capital gain has been shown as Rs.1,40,00,057. At this point, it is relevant to consider the contention of the assessee which were placed before the CIT in reply dated 3.3.2014 to notice u/s 263 of the Act wherein at page 5 middle para, it has been mentioned that the purchase from different persons and sale to different persons is apparent from the sale deed but the group and dealing person is the same i.e. Mr. Mahesh Mehta for the transaction and sale of property at 783/162 and purchase of property at 56/7, DB Gupta Road through Mr. Mahesh Mehta who is the authorised director of M/s Honest Estate (P) Ltd. and he entered into property transaction with the assessee for purchase of property in individual capacity and for sale of property in the representative capacity as director of the said company. This fact and contention of the assessee has not been demolished by the CIT and without bringing out any allegation that the purchase of property and sale of property was with different persons and entities, it cannot be held that the assessee had entered into property transaction with different persons/entities. Further, as we have already noted that the sale of property no. 783/161 was made to Shri Mahesh Mehta and purchase of property no. 56/7, DB Gupta Road was also made from M/s Honest Estates (P) Ltd. in which Mr. Mahesh Mehta is a director representative of the transaction, then in

ITA No. 5700/Del/2014 15 Uday Kumar Vaish totality of the facts and circumstances, especially when the sale deeds of both the transactions are registered and executed on the same date i.e. 17.7.2011, then the half share of sale consideration received by the assessee amounting to Rs. 1 crore attracts capital gain which has been offered by the assessee in the statement of long term capital gain as discussed above. We further observe that while the assessee has shown unaccounted consideration in the statement of capital gain filed along with the return of income, then it further explains the source of unaccounted payment of consideration of purchase of property bearing no. 56/7, DG Gupta Road, hence, no addition pertaining to undisclosed investment could have been made. However, as a vigilant tax collecting authority, the AO adopted a conservative approach and deducted Rs. 1 crore from capital gain and taxed the same under the head of income from other sources which obviously attracts higher tax rate, then this action of the AO is more favourable to the revenue which cannot be held as erroneous and prejudicial to the interest of revenue. 25. At this juncture, it would be appropriate to consider the ratio of the decision of Jurisdictional High Court of Delhi in the case of CIT vs DG Housing (supra) wherein it was held that the Commissioner cannot remit the matter for a fresh decision to the AO to conduct further inquiries without a finding that the order is erroneous as a condition precedent for exercise of jurisdiction us/ 263 of the Act. 26. From operative part of the order of the CIT at para 6 page 9, we note that the CIT has held that the assessment on the issues raised in the show cause notice was made without proper examination, inquiry and verification, therefore, revisional jurisdiction u/s 263 of the Act is warranted in a case where assessment has been made without inquiry or verification. In this para, the CIT contradicts himself in the

ITA No. 5700/Del/2014 16 Uday Kumar Vaish first sentence. He mentions that the assessment was framed without proper examination, inquiry and verification whereas in the second sentence, he writes that the assessment has been made without inquiry or verification which vitiate the impugned order. 27. Coming to the third and last issue raised by the CIT in the notice and impugned order u/s 263 of the Act (supra), is related to sale of several other properties during the relevant previous year. From para 3 of the notice u/s 263 of the Act issued to the assessee, we note that the CIT has picked up six properties to substantiate this issue against the assessee. Ld. counsel of the assessee submitted that property listed at Sl. No. 2 to 6 are related to assessee’s husband Shri Uday Kumar Vaish and the assessee has nothing to do with the capital gain and consideration arising therefrom. Ld. counsel further pointed out that as far as property at sl. No.1, 3, 4 & 5 are concerned, assessee was holding these properties jointly with her husband and the assessee filed statement of short term capital gain in regard to all these four properties which was properly verified, examined and accepted by the AO. Ld. counsel vehemently contended that the CIT did not peruse the statements and calculation of income filed by the assessee along with her husband and the CIT has ignored statement of capital gain filed by the assessee at the time of framing impugned notice u/s 263 of the Act as well as impugned order. 28. Replying to the above, ld. DR submitted that mere query and reply of the assessee are not sufficient to meet the requirement of proper verification and examination of the details filed by the assessee along with return of income and merely because some details have been filed along with return of income and some queries were raised by the AO which do not amount to an adequate and proper examination of the issue. Ld. DR pointed out that there was an understatement of

ITA No. 5700/Del/2014 17 Uday Kumar Vaish consideration pertaining to property at 783/161, DB Gupta Road sold to Mr. Mahesh Mehta and the AO did not consider the issue of understatement of consideration and capital gain in regard to property no. 783/160 and 783/162, therefore, the action of the CIT was quite justified and correct. Replying to the above, ld. counsel of the assessee pointed out that there was no incriminating material against the assessee regarding understatement of sale consideration and capital gain except statement of her husband Shri Uday Kumar Vaish which was recorded during the survey u/s 133 of the Act and the AO very well examined all the relevant papers and documents pertaining to income of capital gain accruing to the assessee during the relevant period, therefore, the view taken by the AO was plausible and in accordance with law because despite deep inquiry during the assessment proceedings to the sale of other properties, there was no incriminating material or allegation against the assessee which could show the understatement of consideration and capital gain by the assessee on sale of other properties. 29. On careful consideration of above submissions, we are of the view that on careful perusal of the statement of capital gain undisputedly submitted by the assessee along with return of income, we note that the assessee has declared capital gain on properties placed at sl. No. 1, 3, 4 & 5 in para 3 page 2 of the notice u/s 263 of the Act, properties at sl. No. 2 & 6 are not in the name of assessee, therefore, we are of the considered opinion that there was no requirement of any further examination and verification with regard to these properties. From para no. 3 of the impugned notice, we note that after placing table of properties, the CIT has simply mentioned that the AO has completed the assessment without making any inquiry or investigation on this issue, therefore, it is apparent that the assessment passed by the AO is erroneous and prejudicial to the interest of revenue. In view of

ITA No. 5700/Del/2014 18 Uday Kumar Vaish documents placed by the assessee before the authorities below, we note that the CIT made a list of properties sold by the assessee during the period under consideration and also included two properties which were undisputedly related to her husband Shri Uday Kumar Vaish, therefore, there was no need of any further verification and examination in regard to sale consideration and capital gain accrued therefrom. As far as capital gain arising from other four properties listed at Sl. No. 1, 3, 4 & 5 is concerned, we note that the assessee declared sale consideration and capital gain in the statement filed along with her return of income. The AO properly considered understatement of consideration and capital gain accrued to the assessee after properly considering the statement of assessee’s husband Shri Uday Kumar Vaish recorded u/s 133 of the Act. We are unable to see any other incriminating material or evidence which could establish the allegation of understatement of sale consideration and capital gain on other properties. Per contra, from the assessment order, we note that the AO took a favourable view to the revenue by placing Rs. 1 crore under the head of income from other sources instead of income from capital gains as declared by the assessee. Without making any deliberation on the merit of this action of the AO, we are of the view that decision taken by the AO cannot be held as unsustainable or not in accordance with law. 30. From operative part of the impugned order, we note that the CIT has remitted all three issues to the file of AO by holding that the AO has failed to conduct proper examination and verification on three issues. The CIT further held that in view of various judicial pronouncements, it has been held that where the inquiry or verification is warranted but not done, it would certainly cause prejudice to the revenue and the Commissioner shall be justified in remanding the matter back to the AO for making such inquiry. At this juncture, it would

ITA No. 5700/Del/2014 19 Uday Kumar Vaish be appropriate to consider the ratio laid down by the Jurisdictional High Court of Delhi in the case of ITO vs DG Housing Projects Ltd. (supra), wherein it was held that the Commissioner cannot remit the matter for fresh decision to AO to conduct further inquiry without a finding that the order of the AO is erroneous because such finding that the order is erroneous is condition precedent u/s 263 of the Act. 31. The relevant operative part of this order in para 10 and 11 and relevant para 16 to 18 read as follows:- “10. Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. Section 263 has been enacted to empower the CIT to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the Revenue. The expression „prejudicial to the interest of the Revenue‟ is of wide import and is not confined to merely loss of tax. The term „erroneous‟ means a wrong/incorrect decision deviating from law. This expression postulates an error which makes an order unsustainable in law. 11. The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word „erroneous‟ includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on merits.

ITA No. 5700/Del/2014 20 Uday Kumar Vaish ------------- 16. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition orrequirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. 17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction

ITA No. 5700/Del/2014 21 Uday Kumar Vaish under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT [see CIT vs. Shree Manjunathesware Packing Products, 231 ITR 53 (SC)]. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. 18. It is in this context that the Supreme Court in 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

ITA No. 5700/Del/2014 22 Uday Kumar Vaish 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.” 32. In view of above, as per ratio laid down by Hon’ble Jurisdictional High Court, it is amply clear that in the cases where there is inadequate inquiry but not lack of inquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if inquiry and verification is conducted by the CIT and he is able to establish and show the error and mistake made by the AO, making the order unsustainable in law. Their lordships further made it clear that in some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. In this situation, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further inquiry without a finding that the order is erroneous. In this judgement, it was further held that the distinction must be kept in mind by the CIT while exercising judgment under Section 263 of the Act and in absence of the finding that the order is erroneous and prejudicial to the interest of revenue, the exercise of jurisdiction under said section is not sustainable. The assessee has also held that the finding that the order is erroneous is the condition or requirement which must be satisfied for exercise of jurisdiction u/s 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean that the CIT has not examined and

ITA No. 5700/Del/2014 23 Uday Kumar Vaish decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. In this judgment, their lordships also guided us by saying that in the most of the cases of alleged inadequate investigation, it would be difficult to hold that the order of the AO, who had conducted inquiries and had acted as an investigator is erroneous without CIT conducting verification/inquiry. It was also laid down that the CIT can direct reconsideration of assessment on this ground but only when the order is erroneous and an order of remit cannot be passed by the CIT to ask the AO to decide whether the order was erroneous and such order is not permissible under the provisions of section 263 of the Act. Finally, the bottom-line of this judgment is that the jurisdictional pre-condition for invoking section 263 of the Act is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law.

ITA No. 5700/Del/2014 24 Uday Kumar Vaish noted that the assessee had received unaccounted consideration of Rs.1 crore on sale of property to Mr. Mahesh Mehta on the very same date. In this situation, the addition on account of unexplained investment could not be made and income of capital gain accrued to the assessee by way of unaccounted consideration received by her. The tax liability on capital gain attracts which was placed by the assessee along with her return of income available at page 10 of the paper book. The AO after consideration of capital gain statement accepted the amount of Rs. 1 crore as unaccounted consideration received by the assessee on sale of property and paid by the assessee on purchase of property on the very same date and the AO instead of taxing the capital gain taxed Rs.1 crore under the head of income from other sources which is a more favourable view for the revenue. In this situation, view taken by the AO in framing assessment order on all three issues cannot be held as unsustainable and not in accordance with law. In this situation, while the CIT himself is not sure about the issue of erroneousness of impugned assessment order, which is vivid from the contents of the notice issued to the assessee u/s 263 of the Act and in totality of the facts and allegations mentioned in the notice u/s 263 of the Act and in the impugned order passed u/s 263 of the Act, we note that the CIT simply alleged conclusion of the AO and held that the AO has failed to conduct proper inquiry and verification on the issues cited above and without holding any specific erroneousness and without any finding that the views taken by the AO on all three are unsustainable and not in accordance with law. The CIT cannot remit the matter for reassessment to AO. Finally, respectfully following the ratio laid down by jurisdictional High Court of Delhi in the case of DG Housing (supra), we are of the view that the conclusion of the AO on all three alleged issues was supported by reasonable and plausible query, verification and examination of relevant material which is reasonable and the same cannot be held as

ITA No. 5700/Del/2014 25 Uday Kumar Vaish unsustainable and not in accordance with law. In this situation, invoking of provision of section 263 of the Act by issuance of notice and passing impugned order, directing the AO to revisit the issue and to make further inquiry cannot be held as valid and in this situation, action of the CIT issuing notice and passing impugned order cannot be held as sustainable and valid and the same deserves to be quashed. We order accordingly. 34. Ground no. 1 to 4 of the assessee are allowed and notice issued by the CIT and impugned order passed u/s 263 of the Act are quashed.”

ITA No. 5700/Del/2014 26 Uday Kumar Vaish 12. In view of the above, the impugned order is quashed.

Sd/- Sd/- (Lalit Kumar) (N. K. Saini) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 30/11/2016 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5.DR: ITAT ASSISTANT REGISTRAR