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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 27/11/2024 Date of Order – 06/12/2024
O R D E R PER V. DURGA RAO, J.M.
This appeal by the assessee is against the impugned order dated 31/03/2024, passed by the learned Principal Commissioner of Income Tax, National Faceless Appeal Centre, Delhi, [“learned PCIT”], for the assessment year 2016–17.
2. The assessee has raised following grounds:–
“1. The order passed U/s. 263 by the Pr. Commissioner of Income Tax, Nagpur-2 is illegal, invalid and bad in law. 2. The Pr. Commissioner of Income Tax, Nagpur-2 ought to have considered order passed U/s. 147 r.w.s. 144B by the assessing officer NeFAC and all the issued were discussed and return income has been accepted and no addition Vaishnav Yashwant Ashtankar A.Y. 2016–17 made, therefore, again re-examine on same issue is unjustified, unwarranted and excessive.
3. The Pr. Commissioner of Income Tax, Nagpur-2 ought to have considered order passed U/s. 147 r.w.s. 144B by the assessing officer NeFAC is neither erroneous and nor prejudicial to the interest of revenue. Therefore order passed U/s. 263 is unjustified, unwarranted and excessive.
4. The Pr. Commissioner of Income Tax, Nagpur-2 ought to have considered order passed U/s. 147 r.w.s. 144B passed by the NeFAC and NeFAC consider all the replies and relating income from other sources U/s. 56(2) (vii) (b) and were considered and no addition has been madeon 56(2)(vii) (b), again on same issue order passed U/s. 263 is unjustified, unwarranted and excessive.
5. The Pr. Commissioner of Income Tax, Nagpur-2 has not considered the written submission of the assessee and passed the order U/s. 263 without considering detail reply and without going into merits of the case; therefore order passed is unjustified, unwarranted and excessive.
6. The Pr. Commissioner of Income Tax, Nagpur-2 has not accepted that assessee has submitted entire details during the course of assessment proceedings, again on same issue order passed U/s. 263 is unjustified, unwarranted and excessive.
7. The Pr. Commissioner of Income Tax, Nagpur-2 erred in passing order U/s. 263 and setting asides the assessment framed 147 r.w.s. 144B of Income Tax Act, 1961 therefore, order passed is unjustified, unwarranted and excessive.
8. The appellant seeks permission to add any other ground of appeal or amend or alter the aforesaid ground of appeal.”
Facts in brief are that, the assessee, for the year under consideration, filed his return of income on 10/07/2017 on presumptive basis under section 44AD of the Act, disclosing total income of ` 2,92,560. The assessment was originally framed and the case was re–opened under section 147 of the Income Tax Act, 1961 ("the Act"). Notice was issued under section 148 of the Act. The Assessing Officer found that the assessee has purchased immovable property for a consideration of ` 1,19,79,000. Thereafter, the Jurisdictional Assessing Officer issued notice under section 142(1) of the Act seeking certain details and documents from the assessee, in response to which the Vaishnav Yashwant Ashtankar A.Y. 2016–17 assessee furnished replies stating that he was owner of a gas agency under the name of M/s. Satyabama Indane Gas Agency and that he along with two other co–owners, had purchased a property for ` 1,02,85,000, in which the assessee had 1/3rd share. During the course of re–assessment proceedings the assessee furnished copy of purchase deed dated 17/02/2016. The Assessing Officer noted that the cost of property was at ` 1,02,85,000 and the stamp duty value of the property was at ` 1,19,79,000. The assessee also furnished copy of the purchase deed and relied upon certain case laws for the difference in market value and the purchase consideration. Thereafter, the assessment was completed under section 147 r/w section 144B of the Act on 30/03/2022, by the NaFAC. Since the purchase value was less than the stamp duty value of the property by ` 16,94,000, [i.e., ` 1,19,79,000 (–) 1,02,85,000], therefore, as this amount exceeded ` 50,000, the provisions of section 56(2)(vii)(b) of the Act were attracted. The share of the assessee, as per purchase deed was 1/3rd which works out to ` 5,64,666 (1/3rd of ` 16,94,000), therefore, the Assessing Officer held that this amount should have been added to the total income under the head “Income From Other Sources”, which was not done in the order passed under section 147 r/w section 144B of the Act.
Meanwhile, the learned Principal Commissioner of Income Tax (“learned PCIT"), in exercise of revisionary power conferred to him for execution of proceedings under section 263 of the Act. Thereafter, by examining the records, it was seen that the Assessing Officer, NaFAC failed to examine and verity the source of investment in the immovable property purchased and did
Vaishnav Yashwant Ashtankar A.Y. 2016–17 not examine the difference between the stamp duty value over the purchase consideration before passing the assessment order. On examination of the assessment order and records, it was seen that the assessment order is erroneous inasmuch as it is prejudicial to the interests of Revenue for the following reasons which are as under:– “The assessment was reopened for A.Y. 2016-17 as the purchase of immovable property by the assessee for Rs. 1,19,79,000/- was not shown in the original return of income for A.Y. 2016-17 filed by the assessee. During the course of re-assessment proceedings the assessee furnished copy of purchase deed dated 17.02.2016 which showed that immovable property being land had been purchased jointly by the assessee with two other Co- owners for a consideration of Rs.1,02,85,000/-, the stamp duty value of property was Rs.1,19,79,000/-. The Purchase value was less than the stamp duty value of the property by Rs. 16,94,000/- (Rs.1,19,79,000 1,02,85,000). Therefore, as this amount exceeded fifty thousand rupees, provisions of Section 56(2)(vii)(b) of the Income Tax Act were attracted. The share of the assessee, as per purchase deed was 1/3rd which works out to Rs.5,64,666/- (1/3rd of Rs. 16,94,000/-). In view of Section 56(2)(vii)(b) this amount should have been added to the total income as Income from Other Source which was not done in the order passed u/s 147 r.w.s. 144B for A.Y. 2016-17.
In addition, it is seen that the source of investment in the purchase of property i.e. Rs. 34,28,333/- (1/3rd of the purchase consideration of Rs. 1,02,85,000/-) had been claimed by the assessee during reassessment proceedings to be out of old savings and receipts on sale of Agricultural Land. However, no documentary evidence in support of this was examined during the course of reassessment proceedings resulting in non-verification of the claim regarding source of investment of Rs. 34,28,333/- which was the reason for the re- opening of the assessment. In addition, payment of stamp duty of Rs. 2,19,733/- and registration charges of Rs. 10,000/- were also made, the sources of which were also not verified by the Assessing Officer NaFAC, during the reassessment proceedings. The assessee's claim that the difference in market value and purchase consideration being 14.1% i.e. less than 15%, should be accepted as being nominal and relied upon case laws i) M/s LGW Limited Vs ITO Ward 2(3)
(2015) ii) M/s John Fowler (India) Pvt. Ltd. Vs. Deputy Commissioner of Income Tax (2017) in support the same was also not examined and verified. Examination of the case laws shows that both case laws are distinguishable being in respect of section 50C of the Income Tax Act, which pertains to sale of property while the matter under consideration is in respect of purchase of property. Furthermore, no verification of the claim for the difference in market value and Purchase value was done by the Assessing Officer NeFAC. For A.Y. 2016-17 which is the year under consideration, provisions of section 56(2)(vii)(b) of the Income Tax Act are applicable as stamp duty valuation was higher than the purchase consideration. Therefore, relief was granted by the Assessing Officer NeFAC without enquiring into and verifying the claims of the assessee, which should have been done by him.”
Vaishnav Yashwant Ashtankar A.Y. 2016–17
5. The learned PCIT issued notice of hearing dated 16/03/2024, in response to which assessee filed written submissions electronically on 27/03/2024. Following submissions were made by the assessee:–
“1) The assessee strongly objected to revision proceedings initiated u/s263 of the Income Tax Act, 1961. ii) The difference in the market value (Rs.1,02,85,000/-) and sales consideration (Rs. 16,94,000/-) is 14.1% which is less than 15% which is nominal and that the same be considered. The assessee stated that in view of this he had objection in treating Rs.5,64.666/-, as income from other sources as per the provisions of section 56(2)(vii)(b) of the IT Act. The assessee also relied on the following judgements stating that in these it was held that the difference of 10% to 15% is nominal difference: a) 2015)
M/s LGM Limited Vs, ITO, Ward-2(3) b. (2017)ITA No.7454/Mum/2014 M/s John Fowler (India) Pvt. Ltd. Ltd.Vs DCIT c. (2021)85 ITR (Trib) 0674 (Mumbai) Maria Fernandes Cheryl-Vs-Income Tax Officer (International Taxation) In addition, the assessee also stated that the Finance Act, 2020, increased the safe harbour rate ie the rate of variation that will be allowed between the actual sale consideration value and stamp value of property @ 20%. As this variation in the assessee's case was less than 20%, the assessee requested that to be considered in the interest t of justice. iii). That the notice u/s 148 was issued on 31.03.2021 which was beyond 3 years period though the income considered as escaped is not more than 50Lacs. Therefore the notice issued u/s 148 is illegal, invalid and bad in law and consequential proceedings are null and void. iv) In respect of source of purchase of property, the assessee stated that the property was jointly purchases by assessee and other two co- owners i.e Vaishnav Ashtankar and Keshav Ashtankar. The assessee stated that his contribution for purchase of the agriculture land were at Rs.66,07,000/- and remaining amount were paid by the other two co- owners of the property. This investment of Rs.66,07,000/-, was stated by him as being out of his old savings duly accumulated over the years, agricultural income, sale of agricultural land and loans from various parties of the assessee, which was considered by the NaFAC and addition of Rs. 14,11,133/- was only treated as unexplained investment without accepting his contention that payment was made from agricultural land sold at Rs.27,36,866/-. The assessee further stated that the entire stamp duty and registration charges were paid by Keshav Ashtankar and himself.
Vaishnav Yashwant Ashtankar A.Y. 2016–17 v) The assessee submitted that the AO NaFAC has passed the order after considering all the aspects of the case, then again the same can't be ropened u/s363 of the Income Tax Act, 1961.”
The learned PCIT considering the submissions of the assessee set aside the entire matter to the file of the Assessing Officer for adjudication afresh. While doing so, the learned PCIT observed as under:– “7. I have carefully considered the facts of the case and the assessment order along with contentions of the assessee. So far as assessment order dated 24.03.2022 is concerned, I have carefully gone through the record and I find that the Assessing Officer has failed to examine the facts discussed above which have resulted in under assessment of income and thus causing prejudice to the interest of revenue.
In the light of above discussion, I am satisfied that the order passed u/s 147 r.w.s. 144B of the I.T. Act, 1961, dated 24/03/2022 is erroneous in so far as it is prejudicial to the interest of revenue. Accordingly, in exercise of power vested in me u/s 263 of the I.T. Act, 1961, I hereby set aside the order dated 24/03/2022 passed by the NaFAC under section 147 r.w.s. 144B of the Act, 1961 in this case for the A.Y.2016-17, with a direction to the Assessing Officer to pass a fresh assessment order with regard to determination of (i) Income from other sources u/s56(2)(vii) (b) of the IT Act, 1961, (ii) Cash payment for purchase of property (iii) Source of investment in the purchase of immovable property, after giving an opportunity of being heard to the assessee and after conducting necessary enquires.”
Aggrieved, the assessee is in further appeal before the Tribunal.
The learned Counsel for the assessee submitted that the Assessing Officer has re–opened the assessment only for the purpose of examination of all the aspects what is pointed out by the learned PCIT are mentioned in the show cause notice which is placed in the Paper Book at Page–8–9, and the same is reproduced below:–
“In connection with assessment proceedings for AY 2016-17 you are requested to furnish information/documents on the Items specified herein below. You are also requested that the reply/compliance is to be uploaded on e-Proceedings portal. Your submission is required to contain a covering letter specifying the various documents being furnished in the submission- mentioning clearly the Item No. of this Questionnaire for which information/documents are being Vaishnav Yashwant Ashtankar A.Y. 2016–17 submitted and duly page numbered with No of pages clearly mentioned against each Item No. Merely uploading documents without a covering letter specifying Item-wise description will not be treated as due compliance to the Notice.. In case of part compliance, the Covering letter should mention the remaining items that are intended to be submitted later, specifying the date on which the same will be submitted. In case certain details have already been furnished, please mention the same against the respective item, indicating the date of submission of the same. In case of scanned documents, please ensure proper scanning so that documents are legible. Submission of illegible documents will not be treated as compliance to the Notice.
1. Copy of acknowledgement of return of income filled in response to notice u/s 148 of the I.T Act 1961. If not filed, please furnish the reason of failure to furnish the return of income.
Please provide 'Computation of Income' (Col) and details of Tax calculation.
3. Please furnish detailed note on the source of income received by you during the corresponding Previous Year.
4. Copy of your Audited financial statements (Balance Sheet and Profit & Loss Account) along with all schedules/annexure thereto for the year under consideration. In case of no audit, the reason thereof.
Details of Bank Accounts maintained by you in the following format along with Bank statements for the year with narration of all debit and credit entries:
Name and address Closing balance Account No Type of Account of the bank branch on last day of PY with IFSC (in Rs)
6. As per information available with the department, you have made investment in immovable property for Rs. 1,19,79,000/- during the financial year 2015-16. In this connection kindly provide the following details: a. Source of investment along with supporting documentary evidence. b. Copy of the deed of registration of the property. c. Fair market value of the property determined by the competent authority as on the date of purchase. d. Cash flow statement for the year e. Copy of cash book. f. Copy of relevant bank account statement for the period 01/04/2015 to 31/03/2016.”
Vaishnav Yashwant Ashtankar A.Y. 2016–17 8. The learned Counsel also pointed out that he has explained it in detail in respect of cash deposit in the bank account and a copy of bank statement is placed at Page–60 to 63 of the Paper Book. He submitted that after considering all the details, the Assessing Officer has passed the assessment order which cannot be re–visited by the learned PCIT.
Per–contra, the learned Departmental Representative strongly supported the order passed by the learned PCIT and submitted that the Assessing Officer’s order is contrary to the provisions of section 56(2)(vii)(b) of the Act. He strongly supported the order passed by the learned PCIT.
We have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below. The Assessing Officer, in the present case, after issuing notice seeking explanation from the assessee and examining all the details such as bank statement, source of income, etc., held at Page–2 of his order, which reads as under:–
“On perusal of the reply, it is seen that the assessee has owner of gas agency under the name of M/s. Satyabama Indane Gas Agency during the FY 2015- 16. Regarding the purchase of immovable property for Rs. 1,19,79,000/-, the assessee has furnished his reply stating that along with two other co-owners the assessee had purchased a property for Rs.1,02,85,000/- wherein assessee holds 1/3rd share. The assessee has also furnished his explanation on difference of market value and purchase consideration by citing the case laws. The submission of the assessee was test checked and verified with relevant documents submitted by the assessee. On the basis of material available on record, the explanation of the assessee on the issue(s) is/are accepted. The data and documents pertaining to the assessee has been collated and examined. After due diligence, the assessment is completed u/s. 143(3) read with section 147 of the Income Tax Act, 1961 accepting the returned income that was shown by the assessee.
Vaishnav Yashwant Ashtankar A.Y. 2016–17 The copies of assessment order u/s 143(3)/147 along with computation of income and demand notice u/s 156 are issued to the assessee.”
Therefore, it cannot be said that the order passed by the Assessing Officer is erroneous. We have also gone through the contents of the Paper Book filed by the assessee and we find that the assessee has filed all the details before the Assessing Officer, which show that the assessee has discussed all the necessary facts before the Assessing Officer. After considering the entire record, the Assessing Officer has come to an opinion that there is escapement of income and accordingly, he taxed the assessee. In view of the aforesaid discussion, we are of the opinion that it is not a fit case of invoking jurisdiction under section 263 of the Act by the learned PCIT. Accordingly, the order revisionary order passed by the learned PCIT under section 263 of the Act is hereby quashed.
In the result, appeal filed by the assessee is allowed. Order pronounced in the open Court on 06/12/2024