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Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: DR. M.L. MEENA, AM & DR. S. SEETHALAKSHMI, JM vk;dj vihy la-@ITA. No. 62/JP/2021
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR MkWa- ,e- ,y- ehuk] ys[kk lnL; ,oa MkWa- ,l- lhrky{eh] U;kf;d lnL; ds le{k BEFORE: DR. M.L. MEENA, AM & DR. S. SEETHALAKSHMI, JM vk;dj vihy la-@ITA. No. 62/JP/2021 fu/kZkj.k o"kZ@Assessment Years : 2016-17 cuke Neelam Medatwal Principal Commissioner of 1056 Jhalaniyon Ka Rasta, Vs. Income Tax, Kishanpole Bazar, Jaipur-1, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABYPM3192N vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Rajeev Sogani (C.A.) & Miss Shivangi Samdhani (C.A.) jktLo dh vksj ls@ Revenue by : Shri Sanjay Dhariwal (CIT) a lquokbZ dh rkjh[k@ Date of Hearing : 16/06/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 16/08/2022 vkns'k@ ORDER
PER: DR. S. SEETHALAKSHMI, J.M. This is an appeal filed by the assessee directed against the order of the learned Principal Commissioner of Income Tax [hereinafter referred to as (PCIT)], Jaipur-1 passed under 263 of the IT Act dated 05.03.2021 for the Assessment year 2016-17.
At the outset of hearing, the Bench observed that there is delay of 62 days in filing the appeal by the assessee for which the ld. AR of the assessee filed a condonation application dated 05.07.2021 along with Hon’ble Supreme
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Court order, vide Misc. Application No. 665/2021 in SMW (c) No. 03/2020 dated 27.04.2021 mentioning therein that delay in filing the appeal by the assessee is occurred due to lockdown. Thus, the ld. AR of the assessee prayed that the assessee is prevented by sufficient cause in late filing the appeal before ITAT and the delay occurred may kindly be condoned.
During the course of hearing, the ld. DR has no objection to assessee application for condonation of delay and prayed that court may decide the issue as deem fit and proper in the case.
We have heard the rival contentions and perused the materials available on record. The prayer as mentioned by the assessee for condonation of delay of 62 days has merit and we concur with the submission of the assessee. Thus the delay of 62 days in filing the appeal by the assessee is condoned.
The assessee raised the following grounds of appeal:- “1. In the facts and circumstances of the case and in law the ld. PCIT has erred in exercising the revisionary powers by passing the order u/s 263 of IT Act, 1961 setting aside the order passed u/s 143(3) dated 18.12.2018. The action of the ld. PCIT is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the order passed u/s 263. 2. In the facts and circumstances of the case and in law the ld. PCIT has erred in holding the order passed u/s 143(3) dated 18.12.2018 as erroneous and prejudicial to the interest of the revenue. The order passed u/s 263 is bad in law and therefore, the action of the ld. PCIT is illegal, unjustified, arbitrary and against the facts of the case. Relief
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may please be granted by quashing the order passed u/s 263 and holding the order passed u/s 143(3) dated 18.12.2018 as not erroneous and not prejudicial to the interest of the revenue. 3. The appellant craves her rights to add, amend or alter any of the grounds on or before the hearing.”
The brief facts of the case are the assessee filed her return of income on 16th December, 2016 declaring total income of Rs. 16,79,780. Thereafter, the assessee revised her return of income on 31st September, 2018 and declared total income of Rs. 10,76,610/-. The assessee during the year under consideration sold an immovable property, in the capacity of Power of Attorney holder, of her husband Mahesh Medatwal. The assessee offered for tax capital gains earned, on sale of such immovable property, in her return of income. The assessee further claimed deduction u/s 54F while offering capital gains for taxation. Assessment was completed u/s 143(3) and the returned income was accepted. The case of the assessee was then selected for revisionary proceedings. Order u/s 263 was passed and the assessment was set aside to the file of Id. AO to check the taxability of capital gains in the hands of the assessee and to check the claim of deduction u/s 54F.
In the aforesaid order, the AO issued notice to the assessee u/s 142(1) of the I.T. Act, 1961 and re-adjudicated the matter. The relevant part of the assessment order is reproduced as under:-
“ 5. The assessee has claimed deduction u/s 54F OF Rs.7,84,968/- was not shown in original ITR filed which was on 16.12.2016. Thereafter, the assessee has filed revised return showing claimed deduction u/s 54F of Rs.7,84,968/ on 31.03.2018. During the year the assessee claimed deduction u/s 54F & valuation report for supporting evidences
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regarding the such claimed and also shown her income from Salary of Rs.2,16,000/-. 6. The reply filed by the assessee through A/R on the ITBA portal vide letter dated 23.11.2018 and 04.12.2018 the details/information has been found verifiable, on the issues examined, no. adverse .inference has been drawn in the case over the issues involved ire the matter, hence the returned income shown in revised ITR filed on 31.03.2018 by the assessee at Rs.10,76,610/-found acceptable. 7. Thus, the total income assessed at Rs.10,76,610/- Credit of prepaid taxes allowed. The calculation sheet of Tax and Interest in ITNS-150, Demand notice u/s 156 are enclosed being part of the order.”
Being aggrieved by the AO the assessee preferred an appeal before the ld. CIT(A) and the findings are reproduced as under:-
“5. Therefore, In view of the above discussion, it is held that, the order passed by the AO u/s 143(3) of the act on 18.12.2018 for A.Y. 2016-17 is erroneous and prejudicial to the interest of Revenue. I place reliance on the following judicial pronouncements: 1. In the case of M/s Gee Vee Enterprises 99 ITR 375 ( Delhi High Court 0(1995). It was held that the Assessing Officer (AO) is not only an adjudicator but also in investigator, and failure of the AO to conduct the required inquiring and accepting the statement of the assessee without due verification renders the order erroneous as well as prejudicial to the interests of the revenue. Absence of proper inquiring by the AO would render the assessment order erroneous as well as prejudicial to the interests of the revenue as held in following cases: 1. Jagdish Kumar Gulati vs. CIT 269 ITR 71 (Allahabad) 2. Duggal & Co. 220 ITR 456 (Delhi) 3. K.Am Rama Swami Chettiar vs. CIT 220 ITR 657 (Mad.) 1. Hon’ble Supreme Court in the case of Tara Devi Agarwal vs. CIT [(1973) 88 ITR 323] in which Hon’ble CCourt stated that where a stereotype order is passed, which simply accepts what the assessee has said in the return and falls to make enquiries which are called for in the circumstances of the case the commissioner is justified in holding that the order is erroneous and prejudicial to the interests of the revenue.
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The order passed by the AO is also held to be erroneous in so far as prejudicial to the interests of the revenue in terms of explanation 2 to sec. 263 of the Act. While holding so, I also place reliance on judgment of Hon’ble Supreme Court given in the case of Deniel Merchants P; Ltd & others vs. ITO in appeal No. 2396/2017 dated 10.04.2017. The Hon’ble SC has held as follows in the case. “ In all these cases, we find that the Commissioner of Income Tax had passed an order under section 263 of the Income Tax Act, 1961 with the observations that the Assessing Officer did not make any proper inquiry while making the assessment and accepting the explanation of the assessee(s) insofar as receipt of share application money is concerned. On that basis the Commissioner of Income Tax had, after setting aisle the order of the Assessing Officer, simply directed the Assessing Officer to carry through and detailed inquiry. It is this order which is upheld by the High Court. We see no reason to interfere with the order of the High Court. The Speal Leave Petitioner are dismissed. 6. I, therefore, set aside the assessment order passed by the AO u/s 143(3) of the act on 18.12.2018 to be made afresh after considering the issues as listed in paras 4.1 & 4.2 supra. Needless to say that since, there was no appearance on behalf of the assessee during this proceedings, AO shall give an opportunity of being heard to the assessee before completing the assessment pursuant to this order.”
Being aggrieved by the assessment order, the assessee preferred an appeal before us. The Ld AR for the assessee has reiterated its arguments in written submission for all the grounds which are as under:-
“1. Ld. PCIT in her show cause notice, after taking note of Sale Deed, concluded that in the case of assessee assessment was required to be made on protective basis [PB 68]. However, while passing the order u/s 263 she directed Id. AO to verify and, accordingly, check whether the tax liability would arise in the hands or her husband. Thus, the notice and order are conflicting. Once Id. PCIT concluded, based on
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her enquiry, that the addition in the hands of the assessee was to be made on protective basis she had no jurisdiction to procced ahead. 2. Without prejudice to above it is submitted that Id. PCIT in Para 2, Para 4.1, Para 4.2 categorically observed that the assessee sold the immovable property in the capacity of Power of Attorney holder. Hence, she held that the capital gains were to be taxed in the hands of the real owner i.e. Mahesh Medatwal and not the assessee who was just Power of Attorney holder. Ld. PCIT held that Id. AO failed to examine who was the rightful owner of such immovable property and, thus, Id. AO erred in taxing wrong person instead of Mahesh Medatwal. 3. Ld. PCIT also placed reliance on the decisions of Hon'ble Madras High Court in the case of CIT vs Shri C. Sugumaran- ITA no. 840 of 2014 and Hon'ble ITAT Jaipur Bench in the case of Shri Gyan Chand Agarwal- ITA No. 266/JP/2017. In the said decisions it was held that when sale deed was executed by the assessee in capacity of power of attorney holder, then capital gains cannot be taxed in the hands of the assessee as assessee was not the owner. 4. It is, therefore, submitted that when Id. PCIT concluded that the assessee was wrongly taxed for the capital gains which did not accrue to her, then Id. PCIT had no jurisdiction to proceed further under section 263 and examine the deduction u/s 54F. There was error of taxing wrong person but there was no prejudice caused to the revenue. 5. Assessment order can be revised under section 263 only if the twin conditions of "error in the order" and "prejudice cause to the revenue" coexist. 6. Thus, unless prejudice to the interest of the revenue is "established", any assumption of jurisdiction under Section 263, by the Id. PCIT, directing revision of order, is unjustified. In view of the above factual and legal position, Id. PCIT has grossly erred in assuming jurisdiction under section 263. Thus, the entire such proceedings initiated by the ld. PCIT deserves to the quashed.”
On the other hand, the ld. DR relied on the orders of the lower authorities.
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We have heard the rival contentions and perused the material available on record. The contentions of the Ld AR for the assesee are that the assessee filed the return of income on 16-12-2016 declaring total income of Rs.16,79,780-/, But due to change of incumbent the notice u/s 142(1) of the Act along with questionnaire was issued and sent on 28-09-2018 through E-mail requiring certain details from the assessee. Further the AO noted that no compliance was made by the assessee. Thereafter a show cause notice letter alongwith notice u/s 142(1) was issued to the assessee vide letter dated 27-10- 2018 to be heard on 31-10-2018. It is noted from the assessment order as under:-
‘’compliance of notices, the assessee has furnished requisite details/ information on ITBA. In the reply of the A/R of the assessee, he submitted revised copy of ITR and computation of total income, salary certificate, sale deed, valuation report and bank statement, placed on record and the same were test checked and examined.’’
The AO has mentioned in the assessment order that the assessee is an employee of M/s. Meditek Futhto as well as earning interest income under the head of other sources and further she had sold an immovable property during the year under consideration. The AO noted that the assessee has claimed deduction u/s 54F of Rs.7,84,968/- which was not shown in ITR filed on 16-12-2016. Thereafter, the assessee had filed revised return showing deduction claimed of Rs.l7,84,968/- pm 31-03-2018 u/s 54F of the Act. The AO during the course of assessment noted that during the year the assessee claimed deduction u/s 54F of the Act for which valuation report supporting the evidences as to such claim was submitted and the assessee had also shown the salary income of
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Rs.2,16,000/-. The AO further noted that the assessee filed the reply through A/R on the ITBA Portal vide letters dated 23-11-2018 and 04-12-2018 and the details so furnished by the assessee were verified by the AO and the AO after examining the details submitted by the assessee did not find any adverse inference as to the issue in question. Thus the returned income shown in the revised ITR filed on 31-03-2018 by the assessee at Rs.10,76,610- was accepted by the AO which means that the total income is assessed at Rs.10,76,610/- by the AO. In the present case however, the Ld. PCIT in the show cause notice, after taking note of Sale Deed, concluded that in the case of assessee assessment was required to be made on protective basis. However, while passing the order u/s 263 of the Act, The ld PCIT directed the AO to verify and accordingly, check whether the tax liability would arise in the hands of the assessee or her husband. Thus, the notice and order are conflicting. Once ld. PCIT concluded, based on her enquiry that the addition in the hands of the assessee was to be made on protective basis then she had no jurisdiction to proceed ahead. It is also noted from the ld. PCIT order who observed that the assessee sold the immovable property in the capacity of Power of Attorney holder. Hence, she held that the capital gains were to be taxed in the hands of the real owner i.e. Mahesh Medatwal and not the assessee who was just Power of Attorney holder. Ld. PCIT held that AO failed to examine who was the rightful owner of such immovable property and, thus, AO erred in taxing wrong person instead of Mahesh Medatwal. It is also pertinent to note that Ld. PCIT relied upon the decision in the cases of CIT vs Shri C. Sugumaran- ITA no. 840 of 2014 and Hon'ble ITAT Jaipur Bench in the case of Shri Gyan Chand Agarwal- ITA No. 266/JP/2017 wherein it was held that when sale deed was executed by the assessee in capacity of power of attorney holder then capital gains cannot be taxed in the hands of the assessee as assessee was not the owner. Hence the Bench feels that when ld. PCIT
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concluded that the assessee was wrongly taxed for the capital gains which did not accrue to her, then ld. PCIT had no jurisdiction to proceed further under section 263 of the Act and examine the deduction u/s 54F. There was error of taxing wrong person but there was no prejudice caused to the revenue. The ld. PCIT has to be satisfied of twin conditions, namely (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent then Section 263 cannot be invoked. Every loss of revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. It is pertinent to mention that if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which ld PCIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law.
In this regard, we draw strength from the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1: (2000) 243 ITR 83 (SC). We also draw strength from the decision of the Hon'ble Supreme Court in the case of CIT vs. Max India Ltd. (2007) 213 CTR (SC) 266: (2007) 295 ITR 282 (SC) wherein it was held that:
"The phrase 'prejudicial to the interests of the Revenue' in s. 263 of the IT Act, 1961, has to be read in conjunction with the expression 'erroneous' order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interests of the Revenue. For example, when the AO adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the AO has taken one
10 ITA No. 62 /JP/2021 Neelam Medatwal view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the AO is unsustainable in law."
In view of the above facts, circumstances and case laws mentioned hereinabove, we do not concur with the findings of the ld. PCIT. Thus the order passed u/s 263 of the Act, by the ld. PCIT is quashed. Hence, the appeal of the assessee is allowed. In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 16/08/2022. Sd/- Sd/- ¼MkWa- ,l-lhrky{eh½ ¼ MkWa- ,e- ,y- ehuk ½ (Dr. S. Seethalakshmi) (Dr. M.L. Meena ) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 16/08/2022. *Santosh आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Neelam Medatwal, Jaipur. 1. izR;FkhZ@ The Respondent- Pr.CIT, Jaipur-1, Jaipur. 2. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File { ITA No. 62/JP/2021} vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत