SAJJAD ALI,CHITTORGARH vs. DCIT(INTL)- JAIPUR, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ,o Jh ujsUnz dqekj] U;kf;d lnL; ds le{k BEFORE: SHRI RATHOD KAMLESH JAYANTBHAI, AM & SHRI NARINDER KUMAR, JM vk;dj vihy la-@ITA No. 459/JP/2024 fu/kZkj.k o"kZ@Assessment Years : 2016-17 cuke Sajjad Ali DCIT Vs. S/o Tehir Ali, General Merchant, (Intl.)- Jaipur Sadar Bazar, Kapasan, Chittorgarh LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ASOPA 8295 P vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Shrawan Kumar Gupta, Adv. jktLo dh vksj ls@ Revenue by : Sh. Rajesh Ojha (CIT-DR) lquokbZ dh rkjh[k@ Date of Hearing : 06/06/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 24/06/2024 vkns'k@ ORDER

PER: RATHOD KAMLESH JAYANTBHAI, AM

The present appeal filed by the assessee against the order of Commissioner of Income Tax (IT), Delhi-1 dated 27/03/2024 [here in after (ld. CIT)]. The ld. CIT invoked the provision of section 263 of the Income Tax Act [ here in after referred as “Act”] while examining the assessment records in the case of the assessee for assessment year 2016-17. The said

2 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur assessment order was passed under section 147 r.w.s. 144 of the Act, by

the DCIT, Circle (Intl. Tax), Jaipur.

following grounds of appeal;

“1. That the Impugned order u/s 263 of the Act dated 27.03.2024 and notice u/s 263 are bad in law and on facts of the case and hence the same may kindly be quashed. 2. That the Id. Pr. CIT (IT)-Delhi-1 is grossly erred in law as well as on the facts of the case in invoking S. u/s 263 of the Act. The same is being purely contrary to the provisions of law, therefore the impugned order u/s 263 as well as notice u/s 263 of the Act may kindly be quashed. 3. That the Id. Pr. CIT (IT)-Delhi-1 is grossly erred in law as well as on the facts of the case in taking the action u/s 263 of the Act on the allegations that: (a). The assessee was not for Long Term Capital Gain Exemption u/s 54 amounting to Rs.82,28,577/-. (b). That the assessee purchased new residential house after two years. (c). That the Id. AO wrongly allowed the deduction of Rs.82,28,577/- u/s 54 Which are contrary to the facts, without considering the material evidences available on record in their true perspective and sense and such a finding being perverse, the impugned action is bad in law without jurisdiction and being void ab initio, the impugned order u/s 263 may kindly be quashed. 4. The appellant prays your honors indulgence to add, amend or alter all or any of the grounds of the appeal on or before the date of hearing.”

assessee filed his ITR for the A.Y 2016-17 on 20.03.2018. In that return the

3 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur assessee declared the total income at Rs. 99,820/-. There was an

information from ITO, (I&CI), Udaipur that assessee had made investment

in purchase of immovable property at Rs. 1,05,12,601/-. Since, the return of

income filed was only for an amount of Rs. 99,820/-, ld. AO noted that the

source of investment made by the assessee in purchase of immovable

property remained unexplained and escaped the assessment. Based on

that set of facts a notice u/s. 148 of the Act was issued to the assessee on

30.03.2021 for the year under consideration by ITO, Banswara.

3.1 Thereafter, the case was transferred to DCIT, (Intl. Tax) Jaipur.

Assessee did not file his ITR in response to notice u/s 148 of the Income-

tax Act, even after providing of sufficient opportunities to the assessee.

Notice u/s 142(1) of the Act, 1961 was issued on 30.06.2021, 26.11.2021,

16.02.2022 and 24.02.2022 requiring the assessee to furnish information

and documents relevant to his case. The assessee replied to these notices

on 09.12.2021 and 28.02.2022. Reply submitted by the assessee was

taken into consideration by the ld. AO. A Final show cause notice was

issued to the assessee on 08.03.2022. Assessee filed responses on

11.03.2022, 21.03.2022, 23.03.2022 and 24.03.2022. Since the assessee

4 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur did not file return of income, in response to notice u/s. 148, the ld. AO

noted that he had no choice but to complete assessment u/s 144 of the Act.

3.2 The ld. AO noted in the order of the assessment that he called for

information u/s. 133(6) of the Act for verification of the claim made by the

assessee. Based on the material available on record, the final show cause

notice was issued to the assessee vide notice dated 08.03.2022. The

content of the final show cause notice issued reads as under:

"Please refer to the notices u/s 142(1) dated 30.06.2021, 26.11.2021, 16.02.2022 and 24.02.2022 vide which you have been asked to justify your claim. In response to the above, you have not filed proper justification with documentary evidences. Vide your response dated 23.11.2021 and 08.12.2021 you have not been able to justify your claims. You are therefore required to show cause why the following addition shall not be made in your case: 1. (a) You have sold property for consideration of Rs. 1,00,33,670/- on which you have claimed Long Term Capital Gains. As per the computation, you have claimed deduction u/s 48. However, you have not submitted the documentary evidence (Sale deed/ Purchase deed/ Bank statement and sources of payment for purchase). Thus in the absence of the above, the cost of acquisition, improvement & indexation cannot be provided. Also the property will be considered for Short Term Capital Gains with the cost of Acquisition as Nil. You are required to show cause why STCG of Rs.1,00,33,670/- must not be considered for Short Term Capital Gains. (b) Also you have claimed deduction/exemption u/s 54 of the Capital Gains by claiming purchase of property of Rs. 1,05,12,601/- on 24.04.2015 for which you have not submitted any documentary evidences. (c) On calling information u/s 133(6) from M/s Sana Land Developers Pvt Ltd, the assessee vide e-mail dated 01.03.2022 submitted that the booking of Flat No. 604 of Burj Burhan Apartment was cancelled by you and money was retumed in F.Y. 2016-17. Thus the deduction u/s 54 claimed by you amounts to wrongful

5 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur and malafide claim. You are thus required to show cause why the deduction claimed shall not be disallowed and added back to the total income. Also you are required to show cause why penal provision shall not be initiated in your case. (d) Considering the above, you are required to Show Cause why the Short Term Capital Gains shall not be calculated on the entire consideration of Rs. 1,00,33,670/- and added back to the total income. 1. On perusal of your bank a/c 18890100006023 of Bank of Baroda, it is observed that you have received an interest of Rs. 2,00,000/- which has not been offered in the total income. You are required to Show Cause why Rs. 2,00,000/- shall not be added back to the total income as unexplained money 2. On perusal of your Bank a/c No. 18890100006023 of Bank of Baroda; it is also observed that you have received Rs. 15,00,000/- from M/s Nyati Builders Pvt Ltd which has not been offered to tax. You are required to show cause, why Rs. 15,00,000/- shall not be added back to the total income as unexplained money. 3. As per the Bank statement of a/c no. 18890100017421 of Bank of Baroda, Rs. 2,50,000/- has been withdrawn as cash and you are required to provide the purpose and justification."

After issuance of the above detailed show cause notice, the assessee filed

reply dated 11.03.2022, 21.03.2022, 23.03.2022 and 24.03.2022.

Considering that reply of the assessee, the Assessing Officer accepted the

source of payment as explained and the same was considered from sale of

property to M/s. Saifee Foundation.

(Intl. Tax) Jaipur, the CIT, (IT), Delhi-1, called for the records of the

assessment for examination. While examining that record of assessment

6 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur the ld. CIT, noted that the AO did not make proper enquiries in respect of

Long Term Capital Gain Exemptions u/s 54 amounting to Rs. 82,28,577/-.

In this case, the assessee initially booked a flat worth Rs. 1,05,12,601/- on

30.04.2015 from the Builder M/s. Sana Land Developers Pvt. Ltd on which

the assessee claimed exemption u/s 54 of the Income Tax Act, 1961

against the LTCG earned of Rs.82,28,577/-, however, as per builder's letter

dated 01.04.2017 the said flat was cancelled by the assessee by not

accepting of the revision of building plan made by the BMC which was

subject matter while booking of flat on 30.04.2015 and thereafter the

earnest money/advance money was returned by the builder during the F.Y

2017-18. Thereafter, the assessee purchased a flat from M/s. Nyati Builders

Pvt. Ltd. worth Rs. 34,00,000/- on 28.12.2017 and claimed exemption u/s

54 of the Income Tax Act, 1961 including expenses related to various

furniture, furnishing house hold items, Interior & brokerage etc. He further

noted that the assessee had purchased the flat on 28.12.2017 against sale

on 07.04.2015, which was purchased after the two years from the date of

sale or transfer of long term assets, thus he was not eligible to claim

exemption u/s 54 as per conditions laid down in the said section. Based on

that set of facts he issued a notice u/s. 263 of the Act proposing to revise

the order of the assessment and thereby the assessee was issued a

7 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur detailed show cause notice dated 16.02.2024. The assessee replied the

same on 08.03.2024. The ld. CIT noted that the reply of the assessee was

duly considered and the same was not found tenable because of the

following reasons :

(i) The assessee had made investment by booking of flat from the Builder M/s Sana land and developers on 24.04.2015 during the F.Y 2015-16 relevant to A.Y 2016-17, however, as per builder M/s Sana land and developers, Mumbai's cancellation letter dated 01.04.2017, the booked flat was cancelled by the assessee by not accepting of the revision of building plan made by the BMC which was subject matter while booking of flat on 30.04.2015 and cancellation of booked flat by the assessee was accepted by the said builder. Further, the AR of the assessee stated that the assessee had purchased one residential flat worth Rs. 34,00,000/- from M/s Nyati Builders, which was registered on 28.12.2017. The plan reading of the provisions of section 54 of the Income Tax act, 1961 states that the assessee should purchase the new assets being residential house 'one year before or two years after the date on which transfer took place' (ii) It is seen from the ledger account of Nyati Builders Pvt. Ltd. that transaction of Rs. 38,49,930/- was only made with Nyati Builders Pvt. Ltd. during the period from 30.11.2015 to 15.01.2018. Further, on perusal of sale deed dated 28.12.2017 on purchase of flat from M/s. Nyati Builders Pvt. Ltd. it is seen that the purchase cost was Rs. 34,00,000/- was only with stamp duty of Rs. 2,40,000/-. Hence, the reply of the assessee that investment of Rs. 83,36,530/- with M/s. Nyati Builders is not correct. (iii) In his submission, the AR of the assessee contended that the assessee made investment of entire L.Term Capital gain of Rs. 82,28,577/- in purchase of new residential flat from M/s Nyati Builders purchase of furniture, house hold items, Interior and brokerage etc., however, it is seen that plain reading of provisions of section 2(14) states that furniture and house hold expenses are not part of capital assets, thus, the assessee is not eligible for claim of exemption on new assets being residential house u / s 54 of the Income Tax Act, 1961 on these items.

4.1 Based on the stated reasons and as per the power vested upon him,

ld. CIT quashed the order of the assessment by holding as under :

8 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur assessee's own case as the facts of those cases are different from the assessee case. 7. After considering the reply of the assessee as well as the facts and circumstances of the case as stated above, the assessment order passed by the Assessing officer under the provisions of section 147/144 of the Act dated 26.03.2022 is hereby set aside and the AO is directed to pass an order afresh after verifying the claim of assessee under the provisions of section 54 and section 2(14) of the Income Tax Act, 1961. The AO should also verify the genuineness of expenses incurred on account of interior, house hold expenses and furniture expenses mostly paid in cash. 8. Needless, to say that the AO should provide sufficient opportunity before passing the consequent order as per direction given.”

recorded in the order of the ld. CIT(IT), has preferred the present appeal on

the grounds as raised and reproduced in para 2 above. In support of the

various grounds so raised by the ld. AR of the assessee, the written

submissions have been filed. The written submissions so filed by the ld. AR

of the assessee, read as under :

“GOA : 1-3: Invalid jurisdiction and Action u/s 263 FACTS: 1. The brief facts of the case are that the assessee is a NRI form last 30 years doing business at Dubai Pvt. Ltd and regular IT assessee having income from other sources in India. For the year the assessee has filed his return of income on 20.03.2018 declaring the total income of Rs.99,820/-. The case of the assessee for the year under consideration was reopened u/s 148 and notice u/s 148 was issued on dt. 30.03.2021 by the ITO Ward Banswara and the assessment was completed u/s 147/144 by the DCIT Circle(Intl Tax) Jaipur on dt. 26.03.2022. The ld. AO has issued the notice u/s 148 on dt. 30.03.021 on the reason that “The assessee is individual and derives income other sources. The assessee filed his ITR for the A.Y. 2016-17 on 20.03.2018 declaring thererin total income at Rs. 99,820/- and the same had been processed u/s 143(1) on 29.11.2018.

9 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur On perusal of High Risk CRIU/VRU Information available on Insight Portal of the Department information. According to the information received, during the year under consideration, the assessee made investment in purchase of immovable property at Rs.1,05,12,601/-. The assessee has filed his ITR declaring therein income of Rs. 99,820/- only. Therefore, the source of investment made by the assessee in purchase of said immovable property is unexplained. As stated above, the source of investment made by the assessee towards purchase of immovable property worth Rs. 1,05,12,601/- is not explained. Therefore, the said amount of Rs. 1,05,12,601/- represents undisclosed investment of the assessee for A.Y. 2016-17.” Vide page 2 of the assessment order”.

Information u/s 133(6) of the Income-tax Act was called for verification of the claim made by the assessee. On the basis of the material on record, the final show cause notice was issued to the assessee vide notice dated 08.03.2022 which is reproduced as under: “Please refer to the notices u/s 142(1) dated 30.06.2021, 26.11.2021, 16.02.2022 and 24.02.2022 vide which you have been asked to justify your claim. In response to the above, you have not filed proper justification with documentary evidences. Vide your response dated 23.11.2021 and 08.12.2021 you have not been able to justify your claims. You are therefore required to show cause why the following addition shall not be made in your case: (a) You have sold property for consideration of Rs. 1,00,33,670/- on which you have claimed Long Term Capital Gains. As per the computation, you have claimed deduction u/s 48. However, you have not submitted the documentary evidence (Sale deed/ Purchase deed/ Bank statement and sources of payment for purchase). Thus in the absence of the above, the cost of acquisition, improvement & indexation cannot be provided. Also the property will be considered for Short Term Capital Gains with the cost

10 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur of Acquisition as Nil. You are required to show cause why STCG of Rs. 1,00,33,670/- must not be considered for Short Term Capital Gains.

(b) Also you have claimed deduction/exemption u/s 54 of the Capital Gains by claiming purchase of property of Rs. 1,05,12,601/- on 24.04.2015 for which you have not submitted any documentary evidences. (c) On calling information u/s 133(6) from M/s Sana Land Developers Pvt Ltd, the assessee vide e-mail dated 01.03.2022 submitted that the booking of Flat No. 604 of Burj Burhan Apartment was cancelled by you and money was returned in F.Y. 2016-17. Thus the deduction u/s 54 claimed by you amounts to wrongful and malafide claim. You are thus required to show cause why the deduction claimed shall not be disallowed and added back to the total income. Also you are required to show cause why penal provision shall not be initiated in your case. (d) Considering the above, you are required to Show Cause why the Short Term Capital Gains shall not be calculated on the entire consideration of Rs. 1,00,33,670/- and added back to the total income. On perusal of your bank a/c 18890100006023 of Bank of Baroda, it is observed that you have received an interest of Rs. 2,00,000/- which has not been offered in the total income. You are required to Show Cause why Rs. 2,00,000/- shall not be added back to the total income as unexplained money. On perusal of your Bank a/c No. 18890100006023 of Bank of Baroda; it is also observed that you have received Rs. 15,00,000/- from M/s Nyati Builders Pvt Ltd which has not been offered to tax. You are required to show cause, why Rs. 15,00,000/- shall not be added back to the total income as unexplained money. 2. As per the Bank statement of a/c no. 18890100017421 of Bank of Baroda, Rs.2,50,000/- has been withdrawn as cash and you are required to provide the purpose and justification."

“As the AO did not make proper enquiries in respect of Long Term Capital Gain Exemptions u/s 54 amounting to Rs. 82,28,577/-. In this case, the

11 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur assessee initially booked a flat worth Rs.1,05,12,601/- for purchase from M/s. Sana Land Developers Pvt. Ltd. for exemption u/s 54 against the above LTCG but vide email dated 01.03.2022 the assessee submitted that the booking of this flat was cancelled by him and money was returned in FY 2016-17. Thereafter, he purchased a flat from M/s. Nyati Builders Pvt. Ltd. worth Rs. 34,00,000/- as registered on 28/12/2017 and claimed exemption u/s 54 against returned LTCG showing total purchase cost of the flat Rs. 83,36,530/- by including expenses on various furniture, furnishing, house items & brokerage etc. As the assessee purchased flat on 28/12/2017 against sale on 07/04/2015, which was after two years from the date of sale or transfer, he is not eligible to claim exemption u/s 54 as per conditions laid down in the said section.

Hence the ld. Pr. CIT has issued notice u/s 263 to the assessee on dt. 16.02.2024.

(i) The assessee had made investment by booking of flat from the Builder M/s Sanaland and developers on 24.04.2015 during the F.Y 2015-16 relevant to A.Y 2016-17, however, as per builder M/s Sana land and developers, Mumbai’s cancellation letter dated 01.04.2017, the booked flat was cancelled by the assessee by not accepting of the revision of building plan made by the BMC which was subject matter while booking of flat on 30.04.2015 and cancellation of booked flat by the assessee was accepted by the said builder. Further, the AR of the assessee stated that the assessee had purchased one residential flat worth Rs. 34,00,000/- from M/s Nyati Builders, which was registered on 28.12.2017. The plan reading of the provisions of section 54 of the Income Tax act,1961 states that the assessee should purchase the new assets being residential house ‘one year before or two years after the date on which transfer took place’ . (ii) It is seen from the ledger account of Nyati Builders Pvt. Ltd. that transaction of Rs.38,49,930/- was only made with Nyati Builders Pvt. Ltd. during the period from 30.11.2015 to 15.01.2018. Further, on perusal of sale deed dated 28.12.2017 on purchase of flat from M/s. Nyati Builders Pvt. Ltd. it is seen that the purchase cost was Rs. 34,00,000/- was only with stamp duty of Rs. 2,40,000/-. Hence, the reply of the assessee that investment of Rs. 83,36,530/- with M/s. Nyati Builders is not correct. (iii) In his submission, the AR of the assessee contended that the assessee made investment of entire L. Term Capital gain of Rs. 82,28,577/- in purchase of new residential flat from M/s Nyati Builders purchase of furniture, house hold

12 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur items, Interior and brokerage etc., however, it is seen that plain reading of provisions of section 2(14) states that furniture and house hold expenses are not part of capital assets, thus, the assessee is not eligible for claim of exemption on new assets being residential house u/s 54 of the Income Tax Act,1961 on these items.

After considering the reply of the assessee as well as the facts and circumstances of the case as stated above, the assessment order passed by the Assessing officer under the provisions of section 147/144 of the Act dated 26.03.2022

Hence the ld. CIT has held that the assessment order u/s 147/144 dt. 26.03.2022 passed by the AO is hereby set aside and the AO is directed to pass an order afresh after verifying the claim of assessee under the provisions of section 54 and section 2(14) of the Income Tax Act,1961. The AO should also verify the genuineness of expenses incurred on account of interior, house hold expenses and furniture expenses mostly paid in cash.

Thus the ld. Pr. CIT has setaside the assessment to be made afresh.

SUBMISSIONS: 1. Wrong order and action u/s 263: 1.1 Action of the Pr. CIT is invalid and without jurisdiction: It is submitted the action and direction of the ld. Pr. CIT is without jurisdiction and invalid on the facts and legal position because the ld. Pr. CIT has right or jurisdiction of revision u/s 263 only when the order of the AO (i) is erroneous in so far as (ii) it is prejudicial to the interests of the revenue. S. 263 provides as under

“263. (1) The Pr. Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.” [Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or

13 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.] We would like to submit that the shall be erroneous in so far as it is prejudicial to the interests of the revenue as per if the four conditions laid down in explanation of 263 is fulfilled but in the present case the same is not applicable because of following reasons (a) the order is passed without making inquiries or verification which should have been made:- In the present case the ld. AO passed the assessment order after making all the in inquiries or verification which is very clear from the record itself that is why the ld. Pr. CIT has used the word proper inquiry which is not given u/s 263. (b) the order is passed allowing any relief without inquiring into the claim :- In the present case the ld. AO passed the assessment allowing relief u/s 54 after making the inquiring into the claim which is very clear from the record itself that is why the ld. Pr. CIT has used the word proper inquiry which is not given u/s 263. (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119 :- There is no any direction in the present case admittedly (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.]:- there is no such decision. If so then how the action can be taken u/s 263, hence liable to be quashed.

1.2 On perusal of the order of the ld. AO as well as the order of the ld. Pr. CIT itself it is very clearly proved that the order of the AO has neither erroneous nor prejudicial to the interests of the revenue. Because as we would like to draw kind attention of the honble bench that in the above matter the case of the assessee has been reopened u/s 148 was issued for purpose to know the source of investment in purchase of immovable property . 1.3 Thereafter the ld. AO has issued the detailed query letter to the assessee u/s 142(1) raising various query (PB5-15) and asked to the assessee to produce the all the details and replies. In response thereto the assessee has furnished all the details admittedly vide replies to AO (PB35-39) with the details the ld. AO also make inquiry u/s 133(6). Thereafter, during the course of assessment proceedings the ld. AO has also raised the query regarding to deduction claimed u/s 54 itself vide page 3 of the assessment order (PB20) which have also respond by the assessee vide reply to AO (PB35-39). Thus during the course of assessment proceedings the AO verified the all the details and query as taken by the ld. Pr. CIT in his notice u/s 263. And the AO did examine all these details, record and discussion with the assessee, after that the ld. AO had taken a possible view being a quasi judicial authority. That is why the ld. AO has noted same in the assessment order at page 2-3. Thereafter he completed assessment at Rs.

14 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur 99,820/- vide assessment order u/s 147/144 dt. 26.03.2022 by taking a reasonable and possible view.

Here we want to say that if the ld. AO has not examined the issues he could have not made the assessment. When the assessee has filed reply on the same (PB35- 399) with all the details and income and verified the same.

1.4 On these preposition kindly refer the recent decision of the Honble ITAT Jodhpur bench in the case of Lodha Offset Ltd. vs. Pr. CIT ITA No. 155/Jodh/2018 19th March, 2020 Prateek Metals Pvt. Ltd. vs. Pr. CIT ITA No. 156/Jodh/2018 19th March, 2020 Nokha Agro Sevices vs. Pr. CIT ITA No. 171/Jodh/2018 20th March, 2020

1.5 Further the ld. Pr. CIT has not gone in to the merit of the assessee’s case or argument or contentions, if so than how it can be said or found out whether any prejudice in fact has been caused to revenue or not by lack of inquiry on the part of the AO. If no loss of revenue is caused and the result remains the same even after conduct the inquiry. It is very settled principal and legal position by various courts or judgments that it will be wrong to say that merely because proper enquiry was not conduct, the assessment would become prejudicial also. It was incumbent upon the PR. CIT to have shown as to how the order was prejudicial to the interest of the Revenue. In the present case the appellant has furnished a detailed reply (PB35- 39)with the details to the show cause notice by making the reference to the facts of the case and legal position. Despite that the Pr. CIT did not prove or bring any material or circumstantial evidence on record that the details contentions of the assessee on these issues are not genuine, bogus, not verifiable and not correct.

(2.1) In the case of CIT vs. Software Consultants DelHC (2012) 341 ITR 0240 it has been held that Revision—Revision by Commissioner of orders prejudicial to Revenue—Erroneous and prejudicial order—Lack of enquiries—AO reopened the assessment on ground that assessee had made investment in form of FDR of Rs.20 lakhs but in the assessment order passed under s. 147/143(3), AO accepted that assessee had established and proved the source and their capacity to invest Rs.20 lakhs and accordingly no addition was made on this

15 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur account—The return filed by assessee showing loss was accepted—CIT viewed that AO had earned in determining loss after issue of notice under s. 148 as no necessary enquiries conducted by AO in respect of share application money— Tribunal held that the order of AO could not be regarded as erroneous even if AO had failed to carry out necessary verification and required enquiries in respect of share application money, as no addition had been made on account of the reasons for reopening, which were recoded before issue of notice under s. 148— Thus, AO had failed to carry out necessary verification and required enquiries in respect of the share application money, as no addition had been made on account of the reasons for reopening, which were recorded before issue of notice under s. 148 of the Act—It has been held that the AO could not have made an addition on account of share application money as no addition has been made on account of FDRs of Rs.20 lakhs—Held, AO did not make any addition for the reasons recorded at the time of issue of notice under s. 148—That position was not disputed and disturbed by CIT(A) in his order under s. 263 of the Act— Hence, AO could not have made an addition on account of share application money in the assessment proceeding under s. 147/148—Accordingly, assessment order was not erroneous—Thus, CIT could not have exercised jurisdiction under s. 263

(2.2) Also covered by the decision of this Honble ITAT in the case of Palsana Gram Seva Sahakari Samiti Ltd. V/S CIT-3 Jaipur in ITA No. 35 to 37/Jp/2021 dt. 02.11.2021 Where it has been held that ”we found that for the year under consideration, the A.O. on the basis of information from DDIT(System) issued notice U/s 148 of the Act on 30/03/2017 after recording the reasons, as the reason was cash deposits of Rs.50,55,800/- in the bank account. In response of which the assessee filed its return of income on 28/04//2017 declaring total income of Rs.1,08,464/- and claimed the deduction u/s 80P. Thereafter, Scrutiny assessment was started by the A.O., who had issued statutory notice U/s 143(2) and also 142(1) of the Act dated 06/06/2017 thereby raising query and in his query letter which has been responded by the assessee vide filing reply which has already been placed on record at page No. 3-4 and 6-11 of the paper book. The A.O. thereafter considered, examined and verified the same and also examined the books of account which have been placed on record by the assessee. Thereafter, the assessment was completed U/s 148 r.w.s 143(3) of the Act by the A.O. vide his order dated 30.06.2017 after examining all the details. 12. We observed that the ld. PT.CIT or the Commissioner may call for and examine the record of any proceeding U/s 263 if he considers that any order passed therein by the A.O. is erroneous in so far as it is prejudicial to the interests of the revenue. However, on perusal of the order passed by the A.O. as well as order passed by the ld. Pr.CIT, we found that it is clearly manifest that in the present case, the case of the assessee was reopened U/s 148 of the Act on the ground that the A.O. had got information from the DDIT(System) that there was cash deposits of Rs.50,55,800/- in the assessee's bank account maintained with Punjab national Bank of India during F.Y. 2009-10 relevant to A.Y. 2010-11 and the assessee has not filed return of income. Thereafter, the A.O. issued

16 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur statutory notices and seeking queries from the assessee and in reply thereof, as discussed above, the assessee had produced all the details, copies of all the sources of income, submitted details of all the bank accounts, details of cash deposits in the bank accounts, cash book and bank book and relevant books of account for verification. In response thereto, the assessee had also furnished all the details admittedly vide replies to the A.O. which is at page No. 3 to 4 and 6 to 11of the paper book and this fact has also not been disputed by the ld. PT.CIT in its order which goes to show that after examining all the documents, verifying all the details, the A.O. had taken a plausible view being a quasi judicial authority i.e. on the reason the A.O. in his order of assessment had categorically mentioned that "the assessee attended and submitted the requisite details, information and clarifications sought for as per notices and order sheet entries. The above specific finding recorded by the AO goes to show that the AO had taken a reasonable and plausible view after examining all the details as were required for surviving the A.O. in respect of the issue of cash deposits, which was under consideration before the A.O. 13. If so then how the ld. Pr.CIT can assume the jurisdiction u/s 263 on the issue of deduction u/s 80P(2)(d) which were not at all in the reasons recorded u/s 148 for the re-assessment u/s 148 and when the case of the assessee was reopened u/s 147/148 on the limited issue of cash deposit on which the ld. AO has made the inquiry and examined and passed the assessment order which has not at all the disputed even by the ld. Pr. CIT. When the case was reopened u/s 148 for limited and on specific issue, then how the AO can go beyond to that issues, when the scope of inquiry by the AO is limited to that issue and the ld. Pr. CIT also cannot go beyond that issue while exercising jurisdiction u/s 263 of the Act our view. The case of the assessee was more specific to the limited scrutiny or it is not case of the assessee for complete scrutiny u/s 143(3) for regular assessment and the very basis of reopening of the case under section 148 was on account of cash deposits in the bank, then how the ld. Pr. CIT can hold that the AO has failed to make the inquiry, where the scope of inquiry is limited only to the extent of that issue and in the action u/s 148 the issue of deduction u/s 80P was not there. Thus in the proceedings u/s 263 the ld. Pr. CIT cannot assume or except or direct to the ld. AO to examining the issue which was not subject matter of the reasons recorded u/s 148 and under the 148/147 assessment. Our this view found strength from the decision of Coordinate Bench of this Tribunal in the case of Mahendra Singh Dhankhar HUF vs. ACIT ITA No. 265/JP/2020 Jun 30, 2021 (2021) 62 CCH 0271 Jaipur Trib The present case of the assessee is more strong footing here being the assessment u/s 147/148. Therefore, in light of the above facts and position, the ld. PT.CIT could not be said to be justified in holding that the assessment order was passed without examining the issue of deduction u/s 80P(2)(d)” Copy of order is enclosed. (2.3) Latest decision of this Honble Bench in the In the case of Mahendra Singh Dhankhar HUF vs. ACIT ITA No. 265/JP/2020 Jun 30, 2021 (2021) 62 CCH 0271 JaipurTrib where It has been held that

17 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur “Revision—Ordering revision where case is selected for limited scrutiny— Assessee firm is a real estate firm engaged in colonizing and developing residential projects—Case of assessee was selected for limited scrutiny through CASS on account of mismatch of AIR and CIB data, and mismatch in sale turnover reported in audit report and ITR—An addition for wrong calculation of LTCG was made by A.O. which was not challenged by assessee—Subsequently, on basis of certain audit objections, CIT issued notice u/s 263—Assessee submitted that it is a case outside jurisdiction of Commissioner of Income tax to raise objections outside scope of limited scrutiny—CIT ordered for 'Denovo' assessment without considering reply filed by assessee—Held, there is no dispute that scope of enquiry in case of limited scrutiny is only to extent of issues for which case was selected for scrutiny under CASS—CBDT has issued instructions from time to time in this respect and has specifically instructed taxing authorities that scope of enquiry should be limited to verification of all particulars for which limited scrutiny was taken up under CASS—However, in case during assessment proceeding if AO is of view that substantial verification of other issue is also required then case may be taken up for comprehensive scrutiny with approval of Pr.CIT/DIT concerned—It is also instructed that such an approval shall be accorded by Pr.CIT/DIT in writing after being satisfied about merits of issue(s) necessitating wider and detailed scrutiny in case—AO is duty bound to follow instructions in case limited scrutiny assessment proceeding are proposed to be converted into complete scrutiny and without following said procedure and necessary approval of competent authority conducting an enquiry on issue which is outside limited scrutiny would be beyond jurisdiction of AO—As a necessary corollary, Pr. CIT u/s 263 cannot be permitted to traverse beyond jurisdiction that was vested with A.O while framing assessment as what cannot be done directly cannot be done indirectly—Therefore, where matter was selected for limited scrutiny, revisional jurisdiction cannot be exercised for broadening scope of jurisdiction that was originally vested with A.O while framing assessment—As per CIT, reason for which matter was selected for limited scrutiny i.e, mis-match of sales turnover vis-à-vis ITR, CIB & AIR has a direct bearing on opening and closing stock of cost of construction and W.I.P and in turn, on taxable income, therefore, AO was duty bound to examine these issues and AO having failed to examine these issues, AO has effectively failed to examine issues for which matter was selected for limited scrutiny—As far as matters for which case was selected for limited scrutiny in terms of mis-match of sales turnover, same has been duly examined by AO and even CIT has not recorded any adverse findings in terms of lack of enquiry or inadequate enquiry on part of AO—Order passed by CIT u/s 263 is set aside—Assessee’s appeal allowed.”

(2.4) In the case of Paul Bharwaj vs. Pr.CIT in ITA No. 463/Chd/2019 May 13, 2021 (2021) 62 CCH 0120 Chd Trib Revision—Order erroneous or prejudicial to revenue—Over exercise of power—Assessee an individual filed his return declaring income and agricultural income—Case was selected for limited scrutiny for reason that there was a substantial increase in capital during year relevant to assessment year under consideration—AO accepted return filed by assessee—

18 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur Pr. CIT issued notice to assessee u/s 263 and directed AO to make assessment afresh on issues mentioned in notice—Held, Tribunal in case of M/s Su-Raj Diamond Dealers Pvt. Ltd. CIT ITA No 3098/ Mum has quashed order passed u/s 263 in case of limited scrutiny assessment, holding that Pr. CIT under garb of section 263, cannot exceed his jurisdiction holding that when case of assessee was selected for limited scrutiny for reasons viz. (i) Large other expenses claimed in P&L A/c; and (ii) Low income in comparison to High Loans/advance /Investment in shares, therefore, no infirmity could be attributed to assessment framed by A.O on ground that he had failed to deal with other issues which though did not fall within realm of limited reasons for which case was selected for scrutiny assessment—In other words, Pr. CIT in garb of his revisional jurisdiction u/s 263 cannot be permitted to traverse beyond jurisdiction that was vested with A.O while framing assessment—As A.O had aptly confined himself to issues for which case of assessee was selected for limited scrutiny, therefore, no infirmity can be attributed to his order, for reason, that he had failed to dwell upon certain other issues which did not form part of reasons for which case was selected for limited scrutiny under CASS—Case of assessee was selected for limited scrutiny under CASS for reason that there is substantial increase in capital in relevant year and AO passed assessment order and accepted return filed by assessee after examining issue regarding increase in capital account as assessee had credited his capital account with agricultural income and capital gain from sale of flat—Assessee has reflected that same in its capital account—Further in response to letter issued by AO during assessment proceedings, assessee submitted his reply explaining reason for increase in capital—However, Pr. CIT exercising jurisdiction under section 263, directed AO to make fresh assessment on issues which were not subject matter of limited scrutiny—Since, issue raised by assessee in this case has already been decided in favour of assessee Pr. CIT(A) has exceeded jurisdiction u/s 263 by directing AO to make fresh assessment on issues which were not subject matter of assessment framed on basis of limited scrutiny—Assessee’s appeal allowed.

Thus in the present case the position are same and the principal of the above judgments are also applicable in the present case.

Thus in the light of the facts and position the Pr. CIT cannot be said to be justified in holding that assessment order was passed without making inquiry or verification when firstly the case of reopened for the limited purpose secondary despite the same assessee has produced all the details which examined and deduction allowed

19 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur asked by the ld. AO vide page 2-3 of the assessment order where the ld. AO reproduced the SCN and in response to this SCN assessee had filed the reply on dt. 11.03.202022, 21.03.2022, 22.03.2022 and 24.03.2022 where he has clearly mentioned all the facts and produced the documents and after considering all these, the ld. AO has passed the assessment order. Hence it cannot be said that the assessment order passed is erroneous and also prejudicial to revenue. 3. That the assessment was reopened on the reasons of investment in purchase of property and to explain the sources of the same for that he had already stated that the assessee has sold the property and received the consideration of Rs.1.00 crore and for claiming the exemption he invested in this property. On this there is no dispute and purpose of the reopening was complied and now in 263 new issues for claim u/s 54F has been raised, which is out of the jurisdiction. When this was not subject matter of the reopening, however the ld. AO has raised the query and replied by the assessee. 4. Further it is also admitted facts that the assessee sold the flat No. 11-, Saffi Building on dt.04.06.2015 And received the sale consideration of Rs.1.00 crore of his share the indexed cost of the same was 18,05,093/- vide computation and for claiming the exemption u/s 54 he had to invest Rs.82,28,577/- in new residential house property. Hence assessee has purchased and booked a flat No.604 Burj Burahan Moral Church Road Mumbai in M/s Sana land and Developers on dt.24.04.2015 and paid Rs.1,05,12,601/- admittedly, thus during the year assessee has fulfilled the condition laid down u/s 54 of the Act. However unfortunately the said flat was cancelled on the part of the builders on dt. 01.04.2017 and amount has been refunded to the assessee on dt 09.05.2017 to 11.01.2018 in installment after deducting the Service Tax Vat vide cancellation letter dt.01.04.2017 again enclosed and admittedly available on record. On perusal of this letter that the booking has been cancelled due to default on the part of builders. Thus there was no default of the assessee. However the assessee by taking precaution has also booked one another flat with Nyati builders thus the assessee honestly searched or invested in new property and finally invested the amount of Rs.83,36,530/- in other property with M/s Nyati Builders. Thus there was no wrong intention of the assessee and all happened beyond control of the assessee. The assessee only got registered the new flat registry on dt. 28.12.2017. However the payment to the Nyati Builders has also been made in the years 2015-16 and 2016-17 copy of ledger account is enclosed and expenses for other construction, furniture and fixture have also been incurred as the possession had already been taken, copy of allotment letter is enclosed. The GST/VAT deducted, expenses/charges incurred in M/s Sana Builders is also the part of investment because assessee has not get any benefit rather bearded loss. Hence it is not the case that the assessee had made the entire payment on 28.12.2017, thus the investment had been made within two years. In this circumstances deduction u/s 54 cannot be denied during the year under consideration. Further for the default and cheating a builders a poor assessee should not be suffered.

20 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur Thus, it cannot be said that no inquiry or examine has been made by the AO on these issues. The AO has made the inquiry on the above issues. On perusal of the query letter and replies and when the transaction has been shown there and explained and the AO made detailed inquiry and assessee filed all the details related thereto. No one (AO) can read the mind of other person (Pr. CIT) while doing the work on its sprite and cannot guess the expectation or manner of his superior authority. Here the meaning is that non making of an enquiry may render the subject assessment erroneous, however the process of making enquiries may be endless. For someone, some enquiries may be sufficient (here AO), however, the same may be insufficient for the other (here Pr. CIT). There is no definition of proper inquiry in the act. There is no straight jacket formula or parameter to make inquiry in the assessment proceedings.

Same view has been expressed in the case of Kamal Kumar Gupta v/s Pr. CIT 142 TTJ 9(Jp) wherein it has been held that “assessee was asked by the AO to file the

21 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur details of trade creditors which are shown in the name of agriculturalist. In the reply, assessee filed written submission enclosing the list of creditors. Thus, the AO made the inquiry and it is not a case of lack of inquiry but can be case of insufficient enquiry. Pr. CIT was not justified in passing the order u/s 263.” In the present case also is the same position. And also followed in the case of Sh. Gyan Chand Jain v/s Pr. CIT 50 TW 109(Jp). Thus in the light of the facts and position the Pr. CIT cannot be said to be justified in holding that assessment order was passed without making inquiry or verification. The ld. Pr. CIT has presented himself that there is a big scams in the case of the assessee.

5.1 No fix formula or limit or extent of Inquiry: Thus, here it is wrong or incorrect case of the Pr. CIT that no proper inquiry has been made by the AO on the issue. The AO has made the inquiry admittedly on the above issue. Which is clear on perusal of the query letter and replies and details filed and explained and the AO made inquiry and assessee filed all the details related thereto. No one (AO) can read the mind of other person (Pr. CIT) while doing the work on its sprite and cannot guess the expectation or manner of his superior authority. Here the meaning is that non making of an enquiry may render the subject assessment erroneous, however the process of making enquiries may be endless. For someone, some enquiries may be sufficient (here AO), however, the same may be insufficient for the other (here Pr. CIT). There is no definition of proper inquiry in the act. There is no straight jacket formula or parameter to make inquiry in the assessment proceedings. What is required is that the AO should frame the assessment in accordance with the provisions of the Act, as interpreted and in the light of the relevant judicial pronouncements, as available on the date of framing the assessment or material available before him. The AO being a quasi-judicial authority can also take support from one set of the decisions, if there, in case is a diversions of opinion. He can’t be directed to make an assessment in a particular manner, as specifically prohibited by S. 119.

Kindly refer recent judgment of Jodhpur Bench in the case of Ritesh Suhalka V/s Pr. CIT Udaipur in ITA No. 383/Jodh/2019 dt. 21.12.2020. On same plea

5.2 Wrong direction for verification u/s. 2(14): Further the ld. Pr. CIT has wrongly and invalidly give the direction to make verification u/s 2(14) for the verify the genuineness of expenses incurred on account of interior, house hold expenses and furniture expenses mostly paid in cash. As this allegation and issue was not in the Show Cause notice Issued u/s 263 and directly given in the impugned order which is illegal, invalid void-ab-intio and against the law and liable to be deleted.

22 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur “20. Undoubtedly, the expression used in Explanation 2 to Section 263 is “when Commissioner is of the view,” but that does not mean that the view so formed by the Commissioner is not subject to any judicial scrutiny or that such a view being formed is at the unfettered discretion of the Commissioner. The formation of his view has to be in a reasonable manner, it must stand the test of judicial scrutiny, and it must have, at its foundation, the inquiries, and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant- that an Assessing Officer is expected to be. If we are to proceed on the basis, as is being urged by the learned Departmental Representative and as is canvassed in the impugned order, that once Commissioner records his view that the order is passed without making inquiries or verifications which should have been made, we cannot question such a view and we must uphold the validity of revision order, for the recording of that view alone, it would result in a situation that the Commissioner can de facto exercise unfettered powers to subject any order to revision proceedings. To exercise such a revision power, if that proposition is to be upheld, will mean that virtually any order can be subjected to revision proceedings; all that will be necessary is the recording of the Commissioner’s view that “the order is passed without making inquiries or verification which should have been made”. Such an approach will be clearly incongruous. The legal position is fairly well settled that when a public authority has the power to do something in aid of enforcement of a right of a citizen, it is imperative upon him to exercise such powers when circumstances so justify or warrant. Even if the words used in the statute are prima facie enabling, the courts will readily infer a duty to exercise a power which is invested in aid of enforcement of a right—public or private—of a citizen. [L Hirday Naran Vs Income Tax Officer [(1970) 78 ITR 26 (SC)]. As a corollary to this legal position, when a public authority has the powers to do something against any person, such an authority cannot exercise that power unless it is demonstrated that the circumstances so justify or warrant. In a democratic welfare state, all the powers vested in the public authorities are for the good of society. A fortiorari, neither can a public authority decline to exercise the powers, to help anyone, when circumstances so justify or warrant, nor can a public authority exercise the powers, to the detriment of anyone, unless circumstances so justify or warrant. What essentially follows is that unless the Assessing Officer does not conduct, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant- that an Assessing Officer is expected to be, Commissioner cannot legitimately form the view that “the order is passed without making inquiries or verification which should have been made”. The true test for finding out whether Explanation 2(a) has been rightly invoked or not is, therefore, not simply existence of the view, as professed by the Commissioner, about the lack of necessary inquiries and verifications, but an objective finding that the Assessing Officer has not conducted, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a

23 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur prudent, judicious and responsible public servant that the Assessing Officer is expected to be.

24 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur taken bonafide and he has adopted a course permissible in law, he cannot be faulted- which is a sine qua non for invoking the powers under section 263. In the case of Malabar Industrial Co Ltd Vs CIT [(2000) 243 ITR 83 (SC)], Hon’ble Supreme Court has held that “Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law.” The test for what is the least expected of a prudent, judicious and responsible Assessing Officer in the normal course of his assessment work, or what constitutes a permissible course of action for the Assessing Officer, is not what he should have done in the ideal circumstances, but what an Assessing Officer, in the course of his performance of his duties as an Assessing Officer should, as a prudent, judicious or reasonable public servant, reasonably do bonafide in a real-life situation. It is also important to bear in mind the fact that lack of bonafides or unreasonableness in conduct cannot be inferred on mere suspicion; there have to be some strong indicators in direction, or there has to be a specific failure in doing what a prudent, judicious and responsible officer would have done in the normal course of his work in the similar circumstances. On a similar note, a coordinate bench of the Tribunal, in the case of Narayan T Rane vs ITO [(2016) 70 taxmann.com 227 (Mum)] has observed as follows: 20. Clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. ClT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis- a-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have claimed out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made.

The above findings are also fully applicable in the present case.

In case of Chorma Business Ltd v/s DPR. CIT 82 TTJ 540(Cal) it has been held that “AO before making the assessment, having called for details and having discussed the matter with the A/R of the assessee, such an order cannot be called erroneous and prejudicial to the interest of the Revenue only because the AO made a brief assessment order without discussing such details therein. Further, the Pr. CIT also did not give any finding as to whether the share transaction loss claimed

25 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur by the assessee was bogus or not genuine but merely stated that the transaction could have been verified by the contract notes from the brokers, challan etc. Revision order of the PR. CIT Set Aside. Also refer Subrata Kumar Nag v/s PR. CIT 127 TTJ 238(Kol), Rajiv Arora v/s PR. CIT (Supra).

We would like to refer the case of Kartik Financial Services Ltd V/s CIT 55 CCH170 (Mum. Tribunal)(2019). The principal of the case is also applicable here in the present case.

In the case of Nalco Company vs CIT 200 DTR 275 (Pune-C) ITA No.1217/Kol/2017 dt. 05.02.2021 it has been held that if the AO makes inquiry, examines the issue which is born out from the record of the assessment proceedings, then reaches a conclusion in favour of the assessee which is legally possible, the assessment order cannot be characterized as erroneous and prejudicial to the interest of the Revenue. Since none of the four clauses of the Expln. 2 to s. 263(1) appies to the case under consideration, revisionary power, even under the enlarged scope of the Expl. 2, was not legally exercisable.

7.1 No requirement of deep investigation: Thus, on the perusal of the order of the Pr. CIT it is very clear that he was of the view that the AO must have made deep investigation or inquiry and in the case of Arvind Bhartiya Vidhyalaya Samiti v/s ITO 94 TTJ 614(Jp). Where in held that Deep investigation is outside of the preview of assessment procedure”. And also held there is no case laws which say for deep investigations Because there is no limit of deep investigation. In the Act also no reference of the Deep inquiry or investigation. Also refer Gaberial India Ltd. 203 ITR 108 (Bom). That is why Hon’ble SC held in Malabar Fisheries Industries Ltd. 243 ITR 82 (SC) that in each and every type of mistake/ error cannot be made a basis to invoke Sec.263. The case laws available on the subject on this aspect, are distinguishable in as much as those were the cases where no inquiries at all (or very minor reflecting from a short assessment order), which is not at all a case here. Also refer Gyan Chand Gupta V/s PR. CIT 135 TTJ 01(Jp), M/s. Om Rudra Priya Holiday Resort Pvt. Ltd. vs. Pr. CIT (2018) 54 CCH 0597 JaipurTrib

In CIT v/s Jain Construction 257 CTR 336(Raj.) It has been held that Revision u/s 263—Order erroneous and prejudicial to interest of revenue—CIT issued a notice u/s 263 to assessee on ground that assessment order of AO passed u/s 143 (3) was an order erroneous and prejudicial to interest of revenue—Tribunal allowed appeal of assessee—Held, safeguard provided to assessee in section 263 is that mere erroneous orders are not revisable but revisional authority has to further establish with material on record that such erroneous order is also prejudicial to interest of revenue—Twin conditions of assessment order being erroneous and it also being prejudicial to interest of revenue, keeps initial burden on Commissioner, who invokes such jurisdiction—Premise for invoking revisional jurisdiction on the ground that the Assessing Authority made insufficient enquiry or improper enquiry and failed to verify closing stocks in record of assessee, before passing assessment order, falls flat by a bare perusal of assessment

26 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur order itself—Thus, Tribunal was justified in holding that Commissioner was in error in invoking revisional jurisdiction u/s 263—Mere alleged insufficiency of enquiry in opinion of Commissioner by Assessing Authority, could not permit him to invoke revisional jurisdiction u/s 263—Therefore, essential twin conditions for invoking revisional jurisdiction, were not satisfied.

In the case of V.B. Construction (P) Ltd. vs. CIT (2009) 28 CCH 0434 KolTrib held that Revision—Erroneous and prejudicial order—Lack of proper enquiry— There was a time of two years for investigation, the AO had issued questionnaire, the assessee had produced books of account, bills, etc. and replied to various issues raised by AO—Thus, it could not be said that order was passed in haste without making any inquiry on the issues—AO had taken one view where two views are plausible and such view cannot make the order erroneous and prejudicial to the interest of the Revenue—CIT’s view cannot be invoked to substitute the view of the AO—Assessment also does not become erroneous where queries raised during the assessment proceedings are not recorded in the final assessment order.

8.2. On perusal of the order in the present case the ld. CIT has taken action u/s 263 only on the assumption and presumption that the no inquiry has been made by the AO on the issues and not verified. Kindly refer CIT v/s Paras Cotton Co. 288 ITR 211(Raj.) where held that CIT could not have acted on mere assumption. Mere suspicion cannot take place of proof and the order of CIT u/s 263 cannot be sustained. 8.1 In CIT V/s Girdhari Lal 258 ITR 331(Raj.) it has been held, “When the Assessing Officer after going through the material on record and after considering the explanation of the assessee, made some additions and rejected the books of accounts, it could not be said that he had not applied his mind. It is not always necessary that every assessee in the line of business should have the same rate of profit. The tribunal was correct in cancelling the order under sec 263 of Income Tax Act.” When the assessing officer had considered all the relevant material on record, it was basically a question of facts and it could not be interfered with unless the finding of the Tribunal was found perverse. Considering the material on record, it could be said that finding of the Tribunal was perverse. Therefore, the Tribunal was correct in cancelling the order under section 263.”

8.2 Also refer CIT v/s Ganpat Ram Bishnoi 296 ITR 292(Raj.) The record of proceedings clearly shows that the AO has framed his assessment after due application of mind and holding enquiries into all areas, which, according to the CIT have not been at all enquired into and the AO has acted merely on furnishing evidence on one single date. The Tribunal noticed that as per the record of the proceedings, the AO required the assessee to produce documents or material in relation to 10 different items, which included the details of capital contributed by partners, details of purchases made in excess of Rs. 20,000 with evidence,

27 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur confirmation of unsecured loans, amongst other matters, which the AO desired to enquire into. The assessee has produced desired information. The AO studied the sundry creditors, unsecured loans and desired to furnish affidavits of unsecured loans and details of interest paid. The AO again required the assessee to furnish the details of partners capital accounts and also to produce voucher for expenses and the matter was adjourned. After that, assessment was completed by passing assessment order. These matters clearly indicate that the AO particularly made reference to the matters, which the CIT has opined were not inquired. Thus, according to the Tribunal, the foundation to exercise power under s. 263 was not existing. In the aforesaid circumstances on the finding reached by the AO, no question of law really arises for consideration in this appeal. From the record of the proceedings, no presumption can be drawn that the AO had not applied its mind to the various aspects of the matter. In such circumstances, without even prima facie laying foundation for holding that assessment order is erroneous and prejudicial to interest in any matter merely on spacious ground that the AO was required to make an enquiry, cannot be held to satisfy the test of existing necessary condition for invoking jurisdiction under s. 263. When enquiry in fact has been conducted and the AO has reached a particular conclusion, though reference to such enquiries has not been made in the order of the assessment, but the same is apparent from the record of the proceedings the invocation of jurisdiction by the CIT was unsustainable. As the exercise of jurisdiction by the PR. CIT is founded on no material, it was liable to be set aside. Jurisdiction under s. 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiry ought to have been conducted to find something. The finding of the Tribunal that the ITO had passed assessment order after relevant enquiries and considering the aspects of the matter required by the CIT to be considered by him is a finding of fact.

Although in the present case the ld. AO has made the detailed inquiry on the very same issue being the reason of reopening the case u/s 148.

8.3 In the case of CIT V/s Anil Kumar Sharma 335 ITR 83(Del), held that “ Revision- Erroneous and Prejudicial order- lack of proper enquiry- Pr. CIT came to the conclusion that the issue relating to taxability of compensation received by the assessee was not examined by the AO and held that the order of AO is erroneous and prejudicial to the interest of the revenue- Tribunal has arrived at a conclusive finding that through the assessment order does not patently indicate that issue of the taxability of the compensation has been considered by the AO, the record shows that the AO has applied his mind-Thus, it is not a case of lack of enquiry even if the enquiry was inadequate and the CIT was not justified in passing the order under section 263- findings of the Tribunal quashing the order of the PR. CIT passed under Section 263 do not warrant any inference- CIT V/s Sunbeam Auto Ltd. (2009) 227 CTR (Del) 133: (2009) 31 DTR (Del) 1 followed”.

28 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur 8.4. In the case of The Lake Palace Hotels & Motels Pvt Ltd v/s The PR. CIT Udaipur 48 TW 181(Jd). It has been concluded that : The fundamental principles which emerge from the catena of judicial pronouncements may be summarized as under :

(i) The PR. CIT must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interest of the revenue. Both the conditions must be fulfilled: (ii) Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous, that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice for the requirement or order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interest of the revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view under with which the PR. CIT does not agree, it cannot be treated as an erroneous order, unless the view taken by the Assessing Officer is unsustainable under the law. (vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the PR. CIT, while exercising his power under section 263, is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) The Assessing Officer exercise quasi-judicial power vested in him and if he exercise such power in accordance with law and arrives as a conclusion, such conclusion cannot be termed to be erroneous simply because the PR. CIT does not feel satisfied with the conclusion. (viii) The PR. CIT, before exercising his jurisdiction under section 263 , must have material on record to arrive at a satisfaction. (ix) If the Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation be a letter in writing and Assessing Officer allowed the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard.

8.5 It is submitted that when all the details submitted by assessee and AO framed the Assessment order thereon, reliance is placed on a case of High Court of Gujarat 21 Taxman. Comm. 64 (Guj) CIT V/s Amit Corporation it has been held “ When during course of framing of assessment, Assessing Officer had access to all records of assessee and after perusing said records, he framed

29 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur assessment, said assessment could not be re -opened in exercise of revision power under section 263 for making further inquires .’’ Reference has been made to the decision of Hon’ble Allahabad High Court in the case of Anil Bulk Carriers (P) Ltd. vs. PR. CIT (2005) 194 CTR (All.) 226 : (2005) 276 ITR 625 (All.).

It is submitted that department can assume jurisdiction under section 263 of Income tax Act if twin conditions of the order being erroneous and prejudicial to the interest of the revenue are satisfied. If the view taken by the A.O. is one of the possible views then learned CIT cannot assume jurisdiction. For this purpose reliance has been placed on the followings decisions: 1. Malabar Industrial Co. Ltd. v. PR. CIT [2000] 243 ITR 83 (SC) 2. PR. CIT VS MAX INDIA LTD.(2007)213 CTR 266(SC)

It is further submitted that proceedings under s. 263 cannot be taken on the ground that the AO has not made sufficient enquiry. The learned PR. CIT can assume jurisdiction if there has been lack of enquiry. In the instant case, the enquiry has been made, though the enquiry may not be sufficient in the opinion of the learned PR. CIT. The reliance is placed upon the decision of Hon’ble Delhi High Court in the case of CIT v. Hindustan Marketing & Advertising Co. Ltd. [2010] 46 DTR (Del.) 109. The attention is drawn towards the decision of Hon’ble jurisdictional High Court in the case of PR. CIT v. Trustees Anupam Charitable Trust [1987] 65 CTR (Raj.) 30 : [1987] 167 ITR 129 (Raj.)

Thus it is clear that Assessing Officer has made enquiry but sufficiency of enquiry can be depend upon from person to person. The AO cannot remain passive in the face of a return which is apparently in order but calls for further enquiry. It is the duty of the AO to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an enquiry. The word ‘erroneous’ includes the failure to make enquiry. It is submitted that the AO made the enquiry and it is not a case of lack of enquiry. The Hon’ble Delhi High Court in the case of CIT v. Vikas Polymers [2010] 236 CTR (Del.) 476 had an occasion to consider the passing of order under s. 263 of the Act by the learned CIT when the AO made an enquiry and the assessee filed the reply. The Hon’ble Delhi High Court held that assumption of jurisdiction under s. 263 of the Act by learned CIT is not warranted. It will be useful to reproduce the head note from this decision: "Provisions of s. 263 when read as a composite whole make it incumbent upon the PR. CIT before exercising revisional powers to : (i) call for and examine the record, and (ii) give the assessee and opportunity of being heard and thereafter to make or cause to be made such enquiry as he deems necessary. It is only on fulfillment of these twin conditions that the PR. CIT may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage

30 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur that the PR. CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section are manifestly for a purpose. Merely because the PR. CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the Revenue, he may choose not to exercise his power of revision. This is for the reason that if a query is raised during the course of scrutiny by the AO, which was answered to the satisfaction of the AO, but neither the query nor the answer was reflected in the assessment order, this would not by itself lead to the conclusion that the order of the AO called for interference and revision. In the instant case, for example, the CIT has observed in the order passed by him that the assessee has not filed certain documents on the record at the time of assessment, assuming it to be so, this does not justify the conclusion arrived at by the CIT that the AO had shirked his responsibility of examining and investigating the case. More so, in view of the fact that the assessee explained that the capital investment made by the partners, which had been called into question by the CIT was duly reflected in the respective assessments of the partners who were income-tax assessee and the unsecured loan taken from SC (P) Ltd. was duly reflected in the assessment order of the said chit fund which was also an assessee. Merely on the basis that the AO has not examined the cash credits of the partners or deposits from SC (P) Ltd., PR. CIT was not justified in invoking his suomotu powers, especially where the assessee had explained that the capital investment made by the partners, which had been called into question by the PR. CIT was duly reflected in the respective assessments of the partners and the unsecured loan taken from the SC (P) Ltd. was duly reflected in the assessment order of the said person."

The reliance is also placed in the order of the Hon’ble High Court of Bombay in the case of PR. CIT v. Gabrial India Ltd. [1993] 71 TAXMAN 585 (BOM.). It will be useful to reproduce the held portion of the case:

Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1973-74 - Assessee claimed a sum of Rs. 99,326 described 'as plant relay out expenses' as revenue expenditure and ITO, after making enquiries in regard to nature of said expenditure and considering explanation furnished by assessee in that regard, allowed assessee's claim- Subsequently, Commissioner, exercising powers under section 263, cancelled order of the ITO observing that order of ITO did not contain discussion in regard to allow ability of claim for deduction which indicated non-

31 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur application of mind and that claim of assessee required examination as to whether expenditure in question was a revenue or capital expenditure and directed ITO to make a fresh assessment on lines indicated by him - Whether under section 263 substitution of the judgment of the Commissioner for that of the ITO is permissible - Held, no - Whether ITO's conclusion can be termed as erroneous simply because Commissioner does not agree with his conclusion - Held, no - Whether ITO's order could be held to be 'erroneous' simply because in his order he did not make an elaborate discussion - Held, no - Whether provisions of section 263 were applicable to instant case and Commissioner was justified in setting aside assessment order - Held, no In the case of CIT vs. Deepak Real Estate Developers (I)(P) Ltd. (2014) 367 ITR 0377 (Raj) It has been held that Revision—Revision by commissioner of orders prejudicial to revenue—AO observed that return submitted by Assessee was duly supported by necessary evidence and accepted Assessee’s return—CIT in exercise of his power u/s 263, issued notice to Assessee being of opinion that assessment of AO was erroneous and prejudicial to interest of Revenue—ITAT viewed that CIT could not have formed any opinion that assessment order was erroneous and no reasons had been recorded to demonstrate that assessment order was prejudicial to interest of revenue—Held, perusal of Order of ITAT would testify that AO had consciously examined all relevant records in accepting return submitted by Assessee—CIT did not find fault with any findings of AO, culminating in ultimate conclusion that return of Assessee was acceptable— Decision of CIT authenticates that Assessee furnished all relevant records and documents in support of its return accepted by AO—CIT did not reject documents to be irrelevant—CIT only remanded matter to AO observing that documents ought to have been laid before him and examined at time of assessment—Revisional jurisdiction available to Commissioner u/s 263 subject to condition that Order of AO was erroneous and prejudicial to interest of Revenue—Any exercise of revisional jurisdiction, bereft of such satisfaction was impermissible rendering resultant order void—No interference with impugned order of ITAT was warranted—Appeal dismissed In the case of Baberwad Shiksha Samiti v/s PR. CIT 134 DTR 65(Jp) It has been held that the AO accepted the returned income of the assessee. AO issued the query letter on both the issue which was replied by the assessee. Thus the AO made detailed enquiry and no adverse inference has been drawn by him. Hence the order u/s 263 is not sustainable.

In the case of Shree Salasar Overseas (P) Ltd. vs. PR. CIT (2012) 144 TTJ 0041 (UO) held Revision—Erroneous and prejudicial order—Lack of proper enquiry— CIT set aside the assessment order on the ground that the AO has not verified as to whether the provision for development expenses claimed as deduction by the assessee-developer was made on scientific basis having regard to the accrued liability incurred by the assessee—Not justified—Assessee had filed relevant details before the AO in a letter stating that such deductions was also allowed in earlier years—Hence, this is not a case where there was no enquiry—Action under s. 263 cannot be taken on account of inadequate

32 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur enquiry—Therefore, CIT was not justified in setting aside the assessment order by exercising power under s. 263—Swapan Sakar Insurance Consultant & Marketing Services (P) Ltd. (ITA No. 117/JP/2010, dt. 6th Jan., 2011) followed.

In the cae of CIT vs. Ashish Rajpal 320 ITR 0674 (Del) it has been held that Revision—Erroneous and prejudicial order—Lack of proper enquiry—After issue of notice under s. 143(2), several communications were addressed by the assessee to the AO whereby the information, details and documents sought for were adverted to and filed—If upon a perusal of the record filed by the assessee with the AO the Tribunal formed a view that there had been an enquiry which had not been conducted with ‘undue haste’ surely one would be slow to hold otherwise—While the supervisory power of CIT is wide, it cannot be invoked to substitute the view of the AO—Fact that a query was raised during the course of scrutiny which was satisfactorily answered by the assessee but did not get reflected in the assessment order, would not by itself lead to a conclusion that there was no enquiry with respect to transactions carried out by the assessee.

9.1 kindly refer our Submissions which has also been filed before the ld. CIT vide PB 23-27 also above para 3 ””as part of our WS before your honor.

9.2 Contradictory approach of the Revenue: Further it is very admitted facts that the assessee had invested the sale consideration amount in purchase of new residential property as the case was reopened for the inquiry for the reason that “On perusal of High Risk CRIU/VRU Information available on Insight Portal of the Department information. According to the information received, during the year under consideration, the assessee made investment in purchase of immovable property at Rs.1,05,12,601/-. And admittedly this is the same amount and property for which assessee claimed the deduction u/s 54F. It shows that the information and evidence for investment in new assets was very well available on the record of the revenue. The action and reopening of the revenue itself shows that the assessee has made investment in the new house property now the opinion of the ld. Pr. CIT shows his contradictory approach. Hence hot and cold breath cannot be taken same time. If assessee had not made investment the revenue could not have reopened the case of the assessee.

PR.CIT AND ANOTHER vs. C. GOPALASWAMY (2016) 95 CCH 0221 KarHC (2016) 384 ITR 0307 (Karn)

33 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur

The principal of these judgments and judgments referred therein are also applicable in the present case. Copy is enclosed. As in these case it has been held that if the assessee has invested the amount in time and the possession is not received due to the circumstances beyond control to the assessee.

In the case of Abodh Borar vs. ITO IN I.T.A. No.5114/DEL/2016 (2019) 76 ITR (Trib) 0030 (Delhi) (S.N.) It Has Been Held That Capital Gain—Investment in residential house property—Assessee filed her return of income claiming exemption of capital gain u/s 54 and 54F—Assessee had sold two properties— Entire capital gain was invested in residential plot—AO disallowed same on ground that assessee had not completed construction of residential house within period of 3 years—CIT (A) confirmed order of AO—Held, assessee had made investment within prescribed period—Payment was made to developer, who issued allotment letter and entered into agreement—As per agreement developer was supposed to hand over possession of plot within 18 months from date of allotment letter—However, developer did not deliver possession—Hence, assessee could not complete construction within prescribed period of 3 years— This delay in construction was not attributable to assessee—AO and CIT (A) both ignored that assessee had made full payment to developer and such payment was more than amount of deduction claimed by assessee—Since, delay was not on part of assessee but of developer and thus it was beyond control of assessee, it was viewed that benefit of deduction cannot be denied to assessee—It was held that assessee was entitled to exemption claimed by her—AO was directed to delete disallowance—Assessee’s appeal allowed

There also so many judgments on these issues.

was also placed on the following evidence / records / decisions:

34 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur

S.No. Particulars Page No. 1. Copy of Notice u/s 148. 1 Copy of ITR with Computation of total income. 2. 3-4 Copies of notices u/s 142(1) dt. 30.06.2021, 26.11.2021, 3. 5-15 16.02.0022, 24.02.2022 and Show cause notice dt. 08.03.2022.

Copy of Show cause notice u/s 263 dt. 16.02.2024 by Pr. CIT(IT)- 4. 16-17 Delhi-I . 5. Copy of Assessment order u/s 147/144 DT. 26.03.2022. 18-21 Copy of letter to AO. 6. 22 Copy of reply dt. 08.03.2024 to Pr.CIT(IT)-Delhi-I in 7. 23-27 response to notice u/s 263. Copy of provisional allotment of flat by Sana land Developers dt. 8. 28-31 30.04.2015 with receipts of payment. 9. Copy of cancellation letter of flat dt. 01.04.2017. 32-34 0. Copy of letters to AO 35-39

filed vehemently argued that the assessee is a non-resident. The case of

the assessee was re-opened by issue of notice u/s. 148 of the Act to verify

the investment made by the assessee for an amount of Rs. 1,05,12,601/-.

The ld. AO raised the query on all the facets of the issue (APB 5 to 15). The

assessee replied to those query letters as recorded by the ld. AO and he

applied his mind and took a view on the issue. Even the ld. AO issued

notice u/s. 133(6) of the Act to collect independent evidence related to the

issue. The ld. AR of the assessee has drawn our attention to para (c) of the

show cause notice wherein the ld. AO blamed that the claim of the

assessee u/s. 54 amounted to wrongful and malafide claim. The

35 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur assessee refuted that blame. The explanation of the assessee was

considered by the ld. AO. The same issue though considered by the ld. AO

cannot be raised by the ld. CIT without proving that the order of the ld. AO

is erroneous and prejudicial to the interest of the revenue. There is no

finding of the ld. CIT(IT) on that aspect of the matter and therefore, based

on the legal decision and written submission, ld. AR supported the order of

the ld. AO and submitted that there is no scope to invoke the provision of

section 263 of the Act based on the set of facts already on record.

CIT(IT). The ld. DR submitted that the case of the assessee was re-opened

to verify the investment and the same has been verified, but the ld. AO has

not examined the issue of deduction claimed by the assessee u/s. 54 of the

Act. Though the ld. AO vide para (c) of his show cause notice had taken up

the issue, there is no finding recorded in the order so as to deal the issue

on merits and therefore, considering the plain reading of provision of

section 263 of the Act the order of the ld. AO being prejudicial to the interest

of the revenue has been rightly quashed.

36 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur 9. We have heard the rival contentions and perused the material placed

on record. All the grounds of appeal raised by the assessee challenge the

action of the ld. CIT as per provision of section 263 of the Act. As noticed

above, brief facts related to the case of the assessee are that the assessee

is a non-resident and he filed the return of income declaring income of Rs.

99,820/- for the year under consideration. As per the information of High

Risk CRIU/VRU being the insight portal of the revenue, assessee had made

an investment of Rs. 1,05,12,601/-. Since the assessee had declared

income of Rs. 99,820/- only, AO was of the view that there was reason to

believe that said amount of investment made by the assessee represented

undisclosed investment of the assessee. Based on these set of facts, notice

u/s. 148 of the Act was issued to the assessee. The assessee did not file

the return of income u/s. 148 of the Act, but participated in the assessment

proceeding by filling the reply of the notices so issued, and the same is not

under dispute. In the re-assessment proceeding, while examining the

source of investment the ld. AO also went on to examine the claim of the

assessee u/s. 54 of the Act. The relevant part of the show cause notice

issued to the assessee in the matter is as under:

“(c) On calling information u/s 133(6) from M/s Sana Land Developers Pvt Ltd, the assessee vide e-mail dated 01.03.2022 submitted that the booking of Flat No. 604 of Burj Burhan Apartment was cancelled by you and money was retumed in

37 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur F.Y. 2016-17. Thus the deduction u/s 54 claimed by you amounts to wrongful and malafide claim. You are thus required to show cause why the deduction claimed shall not be disallowed and added back to the total income. Also you are required to show cause why penal provision shall not be initiated in your case.” As is evident from the above, show cause notice that the assessee’s 10.

claim was doubted by the ld. AO considering the information collected u/s.

133(6) of the Act. The assessee replied to the said show cause and the

claim of the assessee was accepted by the ld. AO. Thus, it is evident that

the claim of assessee u/s. 54 of the Act was examined, not only from the

details furnished by the assessee but also from the outside information

collected u/s. 133(6) of the Act i.e from M/s. Sana Land Developers Private

Limited and the ld. AO knew that the investment claimed u/s. 54 of the Act

was cancelled and the assessee had booked another property and the

investment for the year under consideration was subsequently reinvested in

another property. Against that order of the assessment, the ld. CIT invoked

the provision of section 263 of the Act being of the view that the ultimate

property is not covered by the provision of section 54 of the Act. While

doing so, he supported his action on the ground that the assessee made

investment by booking of flat from the Builder M/s Sana land and

developers on 24.04.2015 during the F.Y 2015-16 relevant to A.Y 2016-17,

however, as per builder M/s Sana land and developers, Mumbai's

cancellation letter dated 01.04.2017, the booked flat was cancelled by the

38 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur assessee due to non-acceptance of the revision of building plan made by

the BMC which was subject matter while booking of flat on 30.04.2015 and

cancellation of flat got booked by the assessee was accepted by the said

builder. Further, the assessee stated that he purchased one residential flat

worth Rs. 34,00,000/- from M/s Nyati Builders, which was registered on

28.12.2017.

A plain reading of the provisions of section 54 of the Income Tax Act,

1961 makes it clear that the assessee should purchase the new assets

being residential house within 'one year before or two years after the date

on which transfer took place'. He also noted from the ledger account of

Nyati Builders Pvt. Ltd. that transaction of Rs. 38,49,930/- was only made

with Nyati Builders Pvt. Ltd. during the period from 30.11.2015 to

15.01.2018. Further, on perusal of sale deed dated 28.12.2017 regarding

purchase of flat from M/s. Nyati Builders Pvt. Ltd., it is seen that the

purchase cost was Rs. 34,00,000/- only, and stamp duty was Rs. 2,40,000/-

. Hence, the investment of Rs. 83,36,530/- with M/s. Nyati Builders is not

correct as per his views. The ld. CIT upon examination of the record also

noted that the assessee made an investment of entire Long term Capital

gain of Rs. 82,28,577/- in purchase of new residential flat from M/s Nyati

Builders purchase of furniture, house hold items, Interior and brokerage etc.

39 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur However, it is seen that plain reading of provisions of section 2(14) reveals

that furniture and house hold expenses are not part of capital assets. Thus,

the assessee is not eligible for claim of exemption on new assets being

residential house u / s 54 of the Income Tax Act, 1961 on these items. As it

is evident the ld. CIT noted that the ld. AO should have investigated the

issue as contended and observed by him upon examination of the record.

Thus, here the limited question as to whether in view of the observation

noted by the ld. CIT, the order is erroneous or prejudicial to the interest of

the revenue or not?

But before examining that question, at the cost of repetition, it would 11.

be necessary to note that the case of the assessee was re-opened to verify

the source of investment of Rs. 1,05,12,601/- and there is not a single line

of any adverse inference on the issue by the ld. CIT. He was satisfied with

the conduct of the ld. AO on the issue for which the notice u/s. 148 was

issued. But he went on to examine the other issue of deduction claimed u/s

54 of the Act by the assessee amounting to Rs. 82,28,577/-. In this case,

the assessee initially booked a flat worth Rs.1,05,12,601/- for purchase

from M/s. Sana Land Developers Pvt. Ltd., and accordingly claimed

exemption u/s 54 against the long term gain of the assessee, but vide email

40 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur dated 01.03.2022 the assessee submitted that the booking of this flat was

cancelled by him and money was returned in F.Y. 2016-17 i.e. subsequent

to the year under consideration. As the money came back and the earlier

deal was cancelled, the assessee purchased a flat from M/s. Nyati Builders

Pvt. Ltd. worth Rs. 34,00,000/- as registered on 28/12/2017 and claimed

exemption u/s 54 against returned LTCG showing total purchase cost of the

flat Rs. 83,36,530/- by including expenses on various furniture, furnishing,

house items & brokerage etc. As the assessee purchased flat on

28/12/2017 against sale on 07/04/2015, it was after two years from the date

of sale or transfer, the ld. CIT was of the view that the assessee was not

eligible to claim exemption u/s 54 as per conditions laid down in the said

section.

We note that the ld. CIT expected that the ld. AO should have

investigated the issue the way, he wants, and as such he has not

appreciated the content of the show cause notice issued by the ld. AO:

“(c) On calling information u/s 133(6) from M/s Sana Land Developers Pvt Ltd, the assessee vide e-mail dated 01.03.2022 submitted that the booking of Flat No. 604 of Burj Burhan Apartment was cancelled by you and money was retumed in F.Y. 2016-17. Thus the deduction u/s 54 claimed by you amounts to wrongful and malafide claim. You are thus required to show cause why the deduction claimed shall not be disallowed and added back to the total income. Also you are required to show cause why penal provision shall not be initiated in your case.”

41 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur As already observed the ld. AO had not only examined the deduction u/s.

54 of the Act, but also blamed the assessee that the claim made by the

assessee u/s. 54 of the Act amounted to wrongful and malafide claim. The

blame so made was explained by the assessee, and consequently, the

claim of the assessee was allowed by ld. AO. Thus, having raised the issue

of deduction u/s. 54, collected the related information and after applying the

mind on the information so collected, the claim was allowed.

verification of source of investment in property for an amount of Rs.

1,05,12,601/-. Said issue was examined and subsequently the ld. AO

having noticed that the assessee had claimed deduction u/s. 54 of the Act,

he called for information while exercising powers u/s. 133(6) of the Act. All

the details related to claim were examined as is evident from the findings

recorded in the body of the assessment order. We may note here that ld.

CIT evidently did not place on record any apparent error on the part of the

AO to substantiate that order passed by ld. AO is prejudicial to the interest

of revenue. He only mentioned that a detailed investigation was required to

be conducted in order to verify the claim of the assessee for which related

42 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur details had already been called for and examined. The ld. CIT has not

pinpointed as to on which aspect enquiry required to be made was not

made by the ld. AO. He commented about the eligible amount of the claim

which was allowed and considered, based on the information collected.

Thus, no further defect was found from the record collected by the ld. AO.

Since, in this case, ld. AO has clearly incorporated the extract of enquiry

conducted in the body of the assessment order and revenue did not

pinpoint any error on the part of the Assessing Officer the order passed

after due application of mind could not be subjected to proceeding u/s. 263

of the Act.

the assessment had taken a possible view, and revenue did not

demonstrate any error on the part of the ld. AO. In fact, when the ld. AO

had conducted the required enquiry and none of the conditions mentioned

for revision of order as required by Explanation 2(a) of Section 263 of the

Act has been fulfilled, the order passed by the Assessing Officer could not

be deemed to be erroneous so as to be prejudicial to the interests of the

revenue. For this, it is relevant to extract the Explanation 2 of section 263

which the ld. DR has heavily relied upon:

43 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.

In the present case, none of the aforesaid conditions laid down is 13.

fulfilled in the show cause notice for revision issued and it does not

specifically deal with as to for what reason the revision of order u/s. 263 is

justified. Therefore, the ld. CIT was in error in exercising his revisional

jurisdiction u/s 263 of the Act. Accordingly, we do not find any justification

on the part of the ld. CIT to exercise powers under Sec. 263 of the Act, in

dislodging the plausible view that was taken by the A.O, after examining

details & explanation furnished by the assessee.

under section 263 of the Act is that the order of the AO is established to be

erroneous in so far as it is prejudicial to the interest of the Revenue. The ld.

CIT has to satisfy by an order in writing that the twin conditions, namely (i)

the order of the AO sought to be revised is erroneous; and (ii) it is

44 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur prejudicial to the interests of the Revenue. If any one of them is absent i.e.,

if the assessment order is not erroneous, but it is prejudicial to the

Revenue, provision of section 263 cannot be invoked. This provision cannot

be invoked to correct each, and every type of mistake or error committed by

the AO; it is only when an order is erroneous as also prejudicial to

Revenue's interest, then the provision will be attracted. An incorrect

assumption of the fact or an incorrect application of law will satisfy the

requirement of the order being erroneous. The phrase 'prejudicial to the

interest of the Revenue must be read in conjunction with an erroneous

order passed by the AO. Every loss of revenue, because 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 the ld. CIT

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 process, even the AO had no power to

review his own order. Hon'ble Supreme Court in the case of Malabar

Industrial Co. Ltd. vs. CIT [(2000) 243 ITR 83 (SC) held:

“Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when

45 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law.” 16. Even the ld. AR of the assessee has brought to our notice that the

issue raised in re-opened assessment was for verification of investment in

property and its source, but there was nothing to doubt it. There was no

other reason for issuance of notice u/s 148 when no addition was made. In

the similar situation, notice as regards the other issue for which notice as

regards proceeding u/s. 263 of the Act were initiated, was quashed by the

High Court of Delhi in the case of CIT-II Vs. Software Consultants reported

at 21 taxmann.com 155 (Delhi) by holding; “14. For exercise of power under Section 263 of the Act, it is mandatory that the order passed by the Assessing Officer should be erroneous and prejudicial to the interest of the Revenue. In the present case, the Assessing Officer did not make any addition for the reasons recorded at the time of issue of notice under Section 148 of the Act. This position is not disputed and disturbed by the Commissioner of Income Tax in his order under Section 263 of the Act. Sequitur is that the Assessing Officer could not have made an addition on account of share application money in the assessment proceedings under Section 147/148. Accordingly, the assessment order is not erroneous. Thus, the Commissioner of Income Tax could not have exercised jurisdiction under Section 263 of the Act.”

decision to the contrary having the same set of evidence. Thus, respectfully

following the view of the Hon’ble High Court of Delhi, we are of the

considered view that in the present case clause (a) or (b) to Explanation 2

46 ITA No. 459/JP/2024 Sajjad Ali vs DCIT (intl.), Jaipur of section 263 of the Act are not attracted, and that, it is nothing, but a

change of opinion which is not permitted in the eyes of the law.

In the light of the aforesaid discussion, we hold that the order of the

ld. CIT is not in accordance with the provisions of section 263 of the Act as

the twin conditions have not been fulfilled in this case. Thus, we set-aside

the order of the ld. CIT and restore the order passed by the A.O dated

26.03.2022.

Resultantly, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 24/06/2024.

Sd/- Sd/- ¼ujsUnz dqekj½ ¼jkBkSM+ deys'k t;UrHkkbZ½ (NARINDER KUMAR) (RATHOD KAMLESH JAYANTBHAI) U;kf;d lnL;@Judicial Member ys[kk lnL; @Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 24/06/2024 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Sajjad Ali, Chittorgarh 2. izR;FkhZ@ The Respondent- DCIT(Intl.), Jaipur 3. vk;dj vk;qDr@ The ld CIT vk;dj vk;qDr¼vihy½@The ld CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. 6. xkMZ QkbZy@ Guard File (ITA No. 459/JP/2024) vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत