SRI.P. SHYAMARAJU,BANGALORE vs. CIT, BANGALORE

O R D E R Per Shri Jason P. Boaz, A.M. : This appeal by the assessee is directed against the order of the Commissioner of Income Tax, Karnataka (Central), Bangalore dt.28.3.2013 passed under Section 263 of the Income Tax Act, 1961 (in short 'the Act') for Asst. Year 2003-04.

3. Aggrieved by the order under Section 263 of the Act passed by the CIT, Karnataka (Central), Bangalore dt.31.3.2011 for Assessment Year 2003-04, the assessee has preferred this appeal raising the following grounds :- “

1. The order passed by the learned CIT under Section 263 of the Act in so far as it is against the appellant is opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.

2. The learned CIT failed to appreciate that there was no error much less prejudicial to the interest of the revenue in the order passed by the ld. Assessing Officer warranting revision under Section 263 of the Act and consequently, the order by the ld. CIT is opposed to law and facts of the appellant’s case and requires to be cancelled.

3. The ld. CIT failed to appreciate that the various issues pointed out in the notice issued under Section 263 of the Act as constituting errors prejudicial to the interest of revenue were in fact examined in detail by the ld. A.O. in the assessment proceedings and therefore, the view of the ld. CIT that there was no application of mind amounts to a different opinion of the ld. CIT that there was no application of mind amounts to a different opinion of the ld. CIT for which the provisions of section 263 of the Act cannot be invoked. The impugned order being unsustainable in law deserves to be cancelled.

4. The ld. CIT is not justified in setting aside the assessment proceedings and directing the Assessing Officer to make a fresh assessment under the facts and in the circumstances of the appellant’s case. He failed to appreciate that the direction to make a fresh assessment amounts to making fishing and roving enquiries without any material in support thereof and consequently, the impugned order passed being bad in law is liable to be cancelled.

5. The ld. CIT erred while issuing notice under Section 263 of the IT Act in as much as, no quantification was ever furnished to the appellant while initiating the proceedings under Section 263 of the Act thus, vitiating the very provision of revision so empowered with the ld. CIT and thus, the impugned order passed is bad in law and liable to be cancelled.

6. Without prejudice to the above, the learned CIT failed to appreciate that the issues involved in the revision under Section 263 of the Act was earlier assessed by the ld. A.O. and that the impugned additions so originally made were deleted by the learned CIT (Appeals) in appeal and further that the department had not pursued the same in second appeal and thereby outside the provisions of section 263 of the Act and the impugned order passed is bad in law and liable to be cancelled.

7. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and justice rendered.” In support of its appeal, the learned Authorised Representative of the assessee has filed a paper book containing 82 pages.

4.1.1 The learned Authorised Representative of the assessee contended that the actions of the learned CIT in invoking the provisions of section 263 of the Act is without both jurisdiction and proper application of mind. It was contended that the twin conditions required to be fulfilled under Section 263 of the Act; i.e. that the order of assessment must be erroneous and also prejudicial to the interests of revenue having not been satisfied, the assumption of jurisdiction itself is not in accordance with law and therefore the impugned order requires to be set aside and cancelled. In support of the assessee's contentions, the learned Authorised Representative has placed reliance on the following pronouncements :- i. CIT V Max India Ltd. reported in 295 ITR 282 (SC). ii. Malabar Industrial Co. Ltd. V CIT reported in 243 ITR 83 (SC). iii. CIT V Gabriel India Ltd. reported in 203 ITR 108 (Bom) iv. CIT V Sunbeam Auto Ltd. reported in 332 ITR 167 (Delhi). v. CIT and Another V D.G. Gopala Gowda (ITA No.1422/2006 dt.5.3.2013) – unreported decision of the Hon'ble Karnataka High Court; and vi. Saravana Developers V CIT in & 48/Bang/2013 dt.6.9.2013 of the co-ordinate bench of the ITAT, Bangalore.

4.1.2 The learned Authorised Representative submitted that in the course of assessment proceedings, the assessee has furnished its reply in respect of the alleged cash components involved in the purchase of lands; the details of which are forthcoming in the excel sheet which was extracted from the pen drive seized as A/VSM/16 received from the residence of Sri V.Samba moorthy, G.M. (Finance) of the group entities. It is contended that the said details extracted from the seized pen drive cannot be relied upon and used against the assessee, as the figures mentioned therein are only estimates and not real figures. It is submitted that since the extracted figures from the pen drive are only estimates, they have no evidentiary value and therefore the conclusions reached by the learned CIT that they form a basis for making additions is preposterous to say the least. The learned Authorised Representative further contends that there is nothing in the concerned seized material to even remotely indicate that the so called alleged cash payments for purchase of lands were made during the year under consideration, since no dates are mentioned in the seized records. 4.1.3 The learned Authorised Representative pointed out that the very issue of the alleged payments of the cash components for the land dealings with regard to the T.A. Usman Land which is termed as LOT-1/108, which is the subject matter of revision under Section 263 of the Act, was also the subject matter of examination in the assessment proceedings for Assessment Year 2003-04. It is submitted that the Assessing Officer, in the course of assessment proceedings relying upon the details in the extracted excel sheet from the seized pen drive has raised a specific query on this issue in his notice/letter dt.8.12.2008. In response thereto, the assessee vide reply dt.15.12.2008 has furnished a detailed explanation in this regard (relevant correspondence; i.e. the Assessing Officer’s letter dt.8.12.2008 is placed at pages 31 to 39 of the assessee's paper book and the assessee's reply vide letter dt.15.12.2008 is at pages 40 to 47 of the paper book). The learned Authorised Representative submitted that the Assessing Officer duly applying his mind after verification of the alleged entire issue of the cash payments was satisfied with the submissions of the assessee on this very issue and has therefore not made any additions in respect of the alleged payment of cash payment for purchase of T.A. Usman Land at Lot-1/108. It was further contended that as can be seen, from the details of the Assessing Officer queries, vide letter dt.8.12.2008 and the assessee's reply thereto, vide letter dt.15.12.2008, that there was no lack of inquiry or inadequate enquiry on the part of the Assessing Officer on this issue to warrant revisionary proceedings under Section 263 of the Act by the ld CIT. It was prayed Section 263 of the Act for Assessment Year 2003-04 requires to be quashed. 4.2 Per contra, the learned Departmental Representative vehemently supported the impugned order of the learned CIT, submitting that the action of the learned CIT in passing the order under Section 263 of the Act was justified as the said cash payments made towards purchase of lands which were clearly evident from the seized material were not brought to tax by the Assessing Officer in the assessee's hands in the order of assessment for Assessment Year 2003-04. The learned Departmental Representative further submitted that the arguments put forth by the learned Authorised Representative, that the figures appearing in extracted excel sheet from the seized pen drives were mere estimates, is not correct. The said cash amounts appearing in the extracts from the seized pen drive is nothing but undisclosed income of the assessee being invested in the purchase of the said lands. The learned Departmental Representative added that in accordance with the principle of preponderance of probability, the addition can be made in the year of registration, which is the period relevant to Assessment Year 2003-04. The learned Departmental Representative contends that the directions of the learned CIT to the Assessing Officer to make the addition is completely justified, as the payment of the cash component by the assessee would be either at the time of or just before the time of registration of the property. The learned Departmental Representative submits that in the factual matrix of the case, the order of assessment for Assessment Year 2003-04 passed under Section 143(3) rws 153A of the Act dt.31.12.2008 is both erroneous and prejudicial to the interests of revenue and clearly warrants invocation of the provisions of section 263 of the Act and therefore the impugned order of the ld. CIT be confirmed and upheld.

4.3 In his rejoinder the learned Authorised Representative submitted that the details in excel sheet which was extracted from the seized pen drive, on which the learned Departmental Representative places strong reliance, were only estimations, as if one were to observe therefrom, the rates are the same for all the different lands which were purchased by the assessee. The learned Authorised Representative submitted that the rates for purchase of lands situated at different places cannot be the same and consequently, the said rates mentioned in the said excel sheets wherein the same rates are taken for lands at different places are only estimates and not reliable. The learned Authorised Representative further submitted that the reasoning given by the CIT in the impugned order under Section 263 of the Act, that the payments of cash component could have been before registration or on the date of registration, demonstrates that the said surmise made the ld. CIT is only based on suspicion and is bereft of any material evidence to support this view. The learned Authorised Representative argued that the principle of preponderances, put forth by the learned Departmental Representative, is alien to proceedings under Section 263 of the Act and indicates that there are two views possible on this issue and since the Assessing Officer took one possible view, the ld. CIT had no justification to assume jurisdiction under Section 263 of the Act. It is submitted that only those orders which are erroneous and prejudicial to the interest of revenue can alone be subjected to revision under Section 263 of the Act. The learned Authorised Representative further submitted that the inquiries conducted by the Assessing Officer in the proceedings need not be discussed in the order of assessment and it is sufficient if the Assessing Officer has enquired into the matter and sought for and obtained the assessee's reply/explanation on the issues raised. In this context, the learned Authorised Representative placed reliance on the decision of the Hon'ble High Court of Delhi in the case of Sunbeam Auto Ltd. (supra). It was finally pleaded that in view of the above, the impugned CIT passed under Section 263 of the Act vide order dt.31.3.2011 for Assessment Year 2003-04 requires to be quashed. 4.4.1 We have heard the rival contentions and perused and carefully considered the material on record. From the submissions made and paper book at pages 31 to 39 thereof filed by the learned Authorised Representative of the assessee, we find that the Assessing Officer in the course of assessment proceedings had in the questionnaire letter dt.8.12.2008, inter alia, has specifically sought the explanation of the assessee in respect of the payment of the cash components towards the purchase of T.A. Usman Lands at LOT 1/108 arising at of the excel sheet extracted from the seized pen drive marked A/VSM/16. In this regard, it is seen from the same paper book at pages 40 to 47 that the assessee has submitted his reply to the queries raised by the Assessing Officer in letter dt.8.12.2008. Thus, it is clear that the Assessing Officer had called for details and explanation in respect of the details in the seized pen drive; the assessee submitted its explanation thereto, and it appears that the Assessing Officer was satisfied with the assessee's explanation as he took no further action in the matter. In this factual matrix of the case, we are of the opinion that the learned CIT was not justified in exercising revisionary jurisdiction under Section 263 of the Act as it is evident that the issue in question had already been acquired into and considered by the Assessing Officer in the course of assessment proceedings. Consequently, the twin conditions as envisaged in the provisions of section 263 of the Act, i.e. that the order of assessment for Assessment Year 2003-04 was erroneous and prejudicial to the interests of revenue, having not been satisfied in the case on hand, we are of the view that the learned CIT was not justified in the assumption exercise of jurisdiction under Section 263 of the Act and consequently the impugned order is liable to be quashed. In coming to this view, we drew support from the decision of the Hon'ble High Court of Bombay in the case of Gabriel India Ltd. (supra).

4.4.2 The settled position of law as laid down by the Hon'ble Apex Court in the case of CIT V Max India Ltd. (295 ITR 282) is that “…. When the Assessing Officer adopts one of the two courses permissible in law and it has resulted in loss of revenue or where two views are possible and the Assessing Officer has taken a view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of revenue, unless the view taken by the Assessing Officer is unsustainable in law.” In the case on hand, we find that the Assessing Officer after calling for the explanation of the assessee on the said issue of payment of cash components for purchase of land and being satisfied with the assessee's explanation, adopted a possible view. Consequently, the same cannot be considered as erroneous order. We also find, as pointed out by the learned Authorised Representative, that the learned CIT ought not to have directed the Assessing Officer to make the addition and ‘charge to tax the cash components of the payments made on the purchases during the previous year relevant to Assessment Year 2003-04 for the lands registered during the year.’ 4.4.3 In the light of the above discussion, we are of the considered opinion that the impugned order of the CIT, passed under Section 263 of the Act vide order dt.31.3.2011 for Assessment Year 2003-04, is without proper assumption of jurisdiction as it does not satisfy both the requisite conditions in the order sought to be revised, i.e. being erroneous and prejudicial to the interest of revenue. In this view of the matter, we hold that the initiation of revisionary proceedings under Section 263 of the Act is made without proper appreciation of facts on record and is bad in law as it is not in accordance with the conditions specified in the provisions of Section 263 of the Act. We, therefore, cancel the impugned order under Section 263 of the Act dt.31.3.2011 passed by the CIT, Karnataka (Central), Bangalore in the case on hand for Assessment Year 2003-04.