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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM
आदेश / ORDER PER DR. A. L. SAINI, AM: By way of this appeal, the assessee has challenged the correctness of the order passed by the Learned Principal Commissioner of Income Tax-1, Surat (in short “ld. PCIT”], dated 16.10.2018, passed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). 2. The assessee submitted before the Bench, the concise ground of appeal
vide dated 18.11.2022 in place of original grounds of appeal. Hence, the concise grounds of appeal raised by the assessee are reproduced as follows: “1) Ld. Pr.CIT-Surat-1 has erred in facts and in law without application of mind merely on the basis of recommendation of Ld. DCIT-1(3) by recording finding that assessment order for A.Y 2014-2015 passed u/s 143(3) of the I.T. Act, 1961 is erroneous and same was passed without proper inquiry. 2)Show Cause notice and order u/s 263 of the I.T. Act,1961 is based on proposal for revision by Ld. DCIT-1(3) who carried out assessment u/s 143(3) of the I.T. 1961; ; therefore there is no independent application of mind by PCIT
1. Surat..
A.Y.14-15 Sh. Karanbhai M Patel 3) Notice for assessment u/s 143(3) is for scrutiny on limited issues and issue of disclosure of income pursuant to survey of Rs.1,53,00,000 being source and its application into purchase of land is not subjected to scrutiny and in fact Ld. DCIT-1(3) has not scrutinized issue of disclosure of income pursuant to survey based on evidence available in reply to R.T.I by office of DCIT-1(3). 4) Ld. PCIT-Surat has based on show cause notice as well as order u/s 263 of the I.T 1961 adopting verbatim copy from proposal of revision by Ld.DCIT-1(3) which admits full and complete filling of submission by assessee and inquiry in all issues as specified in limited scrutiny notice in recommendation letter by DCIT-1(3) hence there is no independent application of mind by Ld.PCIT-1. 5) PCIT-1(3) Sura has alleged that co-owners for purchase of land are benamindar of assessee without there being any evidence or material or inquiry based on recommendation of DCIT-1(3); the name of co owners are available on record with address and PAN however allegation of benamidar is not subject matter of limited scrutiny. 6) Ld.PCIT-Surat-1 has erred in facts and in law inasmuch as that Karan Dungrani has 53% share in plot no.337, Village Atodara, District Olpad and therefore total consideration of Rs.2,87,45,788/- for aforesaid land is made part of revision however such issue is not part of limited scrutiny. 7) Ld.PCIT-Surat-1 has erred in facts and in law has recorded finding that regarding 47% share in land nothing has been put forth is not relevant as such issue is not part of limited scrutiny. 8) Ld.PCIT-Surat-1 has erred in facts and in law in disbelieving registered Documents of purchase of land pointing out doubt about its co-owners etc; such issue is not only beyond the scope of inquiry under Income-Tax as well as limited scrutiny under Income-TaxAct hence cannot be subject matter of revision. 9) Ld.PCIT-1 Surat has failed to appreciate that scrutiny of assessee is limited and department has not produced any evidence or record as to complete scrutiny by seeking permission of relevant authority and evidence of verification based on reply to R.T.I and in fact assessment inquiry is limited to issue specified in notice for limited scrutiny only as available in record in file of assessment records, hence revision as to issue not specified in limited scrutiny notice cannot be subjected to revision. 10) Ld.PCIT-1 Surat ought to have appreciated and should have kept inquiry under revision only upto limited to issue specified in original notice of limited scrutiny and in fact inquiry of PCIT-1 Surat for revision is fully and totally on issues as to notice for limited scrutiny hence issues specified in revision not part of limited scrutiny are beyond scope of issues specified in notice for limited scrutiny assessment. 11) Complete revision based on issues limited scrutiny and based on recommendation of DCIT-1(3) who has carried out assessment is not permissible in law as such procedure of revision based on recommendation of DCIT conducting assessment has caused bias and prejudice therefore revision without application of mind based on bias and prejudice is null and void.
A.Y.14-15 Sh. Karanbhai M Patel 12) Ld.Pr.CIT-Surat-1 has erred in facts and in law in directing to make assessment De novo.”
At the outset, we note that appeal filed by the assessee for AY.2014-15 is barred by limitation by five days. The assessee has filed a petition for condonation of delay. We have heard both the parties on this preliminary issue. Having regard to the reasons given in the petition for condonation of delay, the minor delay in filling appeal for five days is condoned and appeal is admitted for hearing on merits.
Brief facts qua the issue are that the assessee had filed his return of income for A.Y. 2014-15 on 30.08.2018 declaring income of Rs.2,14,47,360/-. During the year under consideration, the assessee is having (i) salary income being an employee to M/s jay Fun Park Pvt. Ltd and (ii) Rental income on account of letting out godown. The assessee is also a partner in a firm namely M/s Gopal Builders. Scrutiny assessment u/s 143(3) of the Act was finalized on 26.12.2018 accepting the returned income.
5. Later on, Ld. PCIT exercised his jurisdiction under section 263 of the Income Tax Act. The Ld. PCIT on perusal of Scrutiny records, noticed that a survey action was carried out on 26.10.2013 in the case of M/s Gopal Builders wherein the assessee is a partner. During the course of survey action, some incriminating documents regarding purchase of Plot No.337, Village Atodara, District Olpad by Shri Karankumar Manjibhai Dungrani was found and impounded. On the basis of impounded documents which contain details therein of area of plot, cost of plot and payment schedules, assessee's father Shri Manjibhai Dungrani had made a disclosure of Rs.1,53,00,000/- in Shri Karankumar Manjibhai Dungrani's hand on account of unaccounted investment in the impugned land. As per impounded document, total purchase price agreed at Rs.2,87,45,788/-. However, during the assessment proceedings in the case of the firm, M/s Gopal Builders for the A.Y. 2014-15, it was stated in submission dated 27.12.2016 that despite conveyance deed in April, 2013, regarding purchase of the said land, payment of Rs.1,37,45,000/-, was not made, as possession of the A.Y.14-15 Sh. Karanbhai M Patel land was not given due to part encroachment and therefore the amount of Rs.1,37,45,000/- was not offered for taxation and the disclosure made of Rs. 1,53,00,000/- was adequate.
Further it has been accepted that the assessee is having only 53% share in the land and regarding the ownership of the remaining 47% share in the said land, nothing has been put forth. Further, some of the impounded copies of vouchers and bills related to the purchase of the impugned land by the assessee cite cash payments and some are having incomplete details which were required to be verified and cross-tallied to find out the correctness of the disclosure amounts and also for initiation of consequential action in case of other parties involved in the impugned transaction. All these facts have been accepted without proper verification and therefore on account of lack of inquiry this has resulted into the assessment order being erroneous and prejudicial to revenue.
7.On consideration of these irregularities, the Ld. PCIT issued a show cause notice dated 16.10.2018 to the assessee.
8.In response thereto; the assessee filed a written submission on 01.11.2018 before Ld. PCIT, which is reproduced below: Your notice dated 16/10/2018 acknowledges fact that Shri Karan M Dungarani has disclosed income of Rs.1.53/- Crore as consideration of land bearing survey no 337 at village Atodara Sub Dist. Olpad Surat. We invite attention to statement of Shri Manjibhai P Patel dated 26/03/2018 u/s 131 of the I.T. Act, 1961 in which disclosure of Rs.1.53/- Crores have been made and accordingly disclosure was made in statement of total income and tax has been paid. Assessment of Shri Karan M. Dungarani was made u/s 143(3) of the I.T. Act, 1961. Ld. DCIT Circle-1 (3) has inquired about this transaction of land at village Atodara and has also called for copy of conveyance deed of purchase of land at Atodara and ledger accounts from books of accounts of Shri Koran M. Dungarani of F.Y. 2013-2014. In view of such documentary evidence being registered conveyance deed for purchase of land at Atodara which is registered and person selling such land are present in office of registrar, his PAN is provided, Photograph and finger prints of thumb are photographed affixed to such conveyance deed and statement of seller is recorded that seller has received consideration and such recording of statement is video graphed. All such records are retained by Sub Registrar. Income tax can have access to such records vide Sec. 133 (6) of the I.T Act, 1961. Thus once seller has stated before Sub registrar A.Y.14-15 Sh. Karanbhai M Patel being official of state Govt, of Gujarat that seller has received consideration stated in conveyance deed from parties listed in conveyance deed according to particulars stated in conveyance deed and if all these facts are verifiable; it is quite out of place to state that assessment of Karan M Dungarani is erroneous for non-verification of facts of conveyance deed. Secondly, as regards show cause notice u/s. 263 of the I. T. Act, 1961 you had considered statement of Shri Manjibhai P Patel u/s 131 of the I.T. Act, 1961 as sacrosanct and completely binding however in the present show cause notice you do not treat statement of Shri Manjibhai P Patel u/s 131 of the I. T. Act, 1961 as disclosing all facts. As stated in show cause notice non verification of certain persons can in no case result into addiction of income to assessment of income of Shri Karan M Dungarani. I also further state that statement of sellers before sub registrar stating receipt of consideration from persons stated in conveyance deed hence suspicion about dummy is misplaced and cannot survive. It is to be understood that if any person is treated as dummy then entire conveyance deed shall be bogus and such registered conveyance deed has to be declared as bogus by Civil Court in a proceedings for declaratory suit and no Civil Suit is pending for seeking declaration that conveyance deed for land bearing survey no. 337 at village Atodara sub dist. Olpad dist. Surat is bogus as certain persons are dummy of Shri Karan M Dungarani. Under the circumstances; it is submitted that there is no evidence about any person acting as dummy of Shri Karan M Dungarani. Hence, show-cause notice without any iota of evidence or alternatively based on suspicion or based on surmise cannot make any assessment erroneous. Under the circumstances; we state that assessment of Shri Karan M. Dungarani is not at all erroneous nor such investigation can result into any addition of income in the hands of Shri Karan M. Dungarani as Id. DCIT Circle-1 (3) has also verified disclosure as well as execution of conveyance deed and ledger account making payment for such purchase of land at village Atodara sub dist. Olpad dist. Surat. Said records are available as assessment records in file for assessment of Shri Karan M. Dungarani for A. Y. 2014-15."
However, ld PCIT rejected the contention of the assessee and noted that a survey operation was carried out on 26.10.2013 in the case of M/s Gopal Builders in which the assessee is a partner. During the course of survey action, a document in the nature of a handwritten agreement dated 12.03.2013 in plain paper regarding purchase of Plot No.337, Village Atodara, District Olpad by the assessee Shri Karankumar M Dungrani and Shri Nilesh P Vaghasia from Mullinuddin llmodin Mirza on behalf of Ibrahim Sheikh Rasul, Yashmin Hamid Sheikh and Arif Hamid Sheikh was found and impounded from premise at 93, Akhandanand Society & inventorized as page 194 of Annexure BFI-1. As per this document the area of the land is 8.84 Bigha and @ Rs.32,51,786/- per bigha, the total purchase price agreed was at Rs.2,87,45,788/-. As per the impounded
A.Y.14-15 Sh. Karanbhai M Patel document, the first installment of Rs.1,00,00,000/- was to be paid on 12.04.2013, the second installment of Rs.50,00,000/- was to be paid on 01.05.2013, the third installment of Rs.60,00,000/- was to be paid on 12.08.2013 and the fourth installment of Rs.77,45,000/- was to be paid on 12.10.2013. During the course of survey action, statement of assessee's father Shri Manjibhai Dungrani, was recorded wherein he had made a disclosure of Rs.1,53,00,000/- in the hands of Shri Karankumar M Dungrani on account of unaccounted investment in the said land Plot No.337, Village Atodara, District Olpad.
The ld PCIT note that as per impounded document, total purchase price agreed was at Rs.2,87,45,788/- and payment schedules are specifically recorded therein. However, during the assessment proceedings in the case of the Firm, M/s Gopal Builders for A.Y. 2014-15, it was stated in submission dated 27.12.2016 that despite conveyance deed in April, 2013, regarding purchase of the said land, payment of Rs.1,37,45,000/- was not made as possession of the Jand was not given due to part encroachment and therefore the amount of Rs.1,37,45,000/-was not offered for taxation and the disclosure made of Rs.1,53,00,000/- was adequate.
However, ld PCIT did not accept these contention raised by the assessee, and observed that as the basic presumption in case of documents found during the course of search and survey action is that the transactions recorded therein are true and if the transaction has been carried out, transactions recorded for future dates should also be considered at the value given in impounded/seized papers. In the instant case, the said transaction in land is completed as accepted by the assessee and moreover, transaction has attained finality as evident from the Purchase deed Certificate No. IN-GJ45901892968713L carried out on 18.04.2013 by Shri Karanbhai Manjibhai Dungarani & others. Therefore, it is to be understood that the payment on future dates would also have been made. No sane person who had agreed to sale land for Rs.2,87,45,788/- would make the sale for just Rs.1,53,00,000/-. This point has not been perused by the Assessing Officer-
A.Y.14-15 Sh. Karanbhai M Patel concerned during the course of assessment proceedings and accepted the contention put forth by the assessee without making any enquiry. The AO concerned had not applied his mind that the sanctity of the impounded documents has been proved in view of the reply to Q. No. 12 wherein Shri Manjibhai Dungrani has admitted that these pages pertain to hand written & other papers of aforesaid land at village Atodara distributing consideration among various co- owners of land. Moreover, if test of human probabilities is applied to the facts of the case becomes evident that transaction reflecting in the above mentioned impounded document pertain to the assessee and have taken place otherwise no reason can be there to keep the record of any financial transaction.
Further, Shri Manjibhai Patel had admitted that these papers were found from his office which lends to credibility that the document impounded assumes much greater value than what it would have been otherwise. Therefore, the entries reflecting in the impounded documents] cannot be washed away lightly. Also, the impounded documents itself and more so because of the nature of entries contained therein do not make those papers as a dumb document. Therefore the AO concerned ought to carry out enquiries in this aspect which was not done at all by him during the course of scrutiny proceedings.
13.Further, ld PCIT noted that AO concerned has accepted the fact that Shri Karankumar M Dungrani is only 53% share in the land and he did make enquire about the ownership of remaining 47% land whether the ownership of the remaining 47% is in just a dummy name or in name of some real person has not been investigated.
The ld PCIT noted from Pages 180 to 196 of the loose paper file impounded as BFI-1 from the premise at 93, Akhandanand Society, Adajan, Surat which are copies of various bills, vouchers etc are also related to the purchase by the assessee in respect of the impugned land at Survey No.337, Village Atodara District Olpad. Some of the vouchers and copies impounded cite cash payments
A.Y.14-15 Sh. Karanbhai M Patel while some others are incomplete and do not give details of persons who have made the cash payments. These details were also required to be verified and cross-tallied to find out the correctness of the disclosure amounts and also for initiation of consequential action in case of the other persons such as Ibrahim Rasul Sheikh, Yashmin Hamid Sheikh, Arif Hamid Sheikh, Zubin Mirza Nilesh P Vaghana etc. who had entered into this financial transactions. But these important aspects have not been investigated by the AO concerned which sufficiently prove the lack of enquiry on his end.
The ld PCIT noted that during the course of assessment proceedings, the AO concerned inquired about the transactions of land at Atodara village and documents such conveyance deed of purchase and ledger accounts from books of accounts of the assessee were called for but the AO concerned failed to verify the facts reflected in the impounded documents as well as statements recorded on oath as mentioned in the foregoing paragraphs 4.1 to 4.3. All these facts narrated above have been accepted without proper verification which has resulted into the assessment order being erroneous and prejudicial to revenue.
16.Based on these facts, the ld PCIT noted that for invoking provision of section 263 of the I.T. Act, 1961, the interpretation of expression "erroneous in so far as it is prejudicial to the interest of revenue" has been a contentious one. In order to provide clarity on the issue Explanation 2 to section 263 (1) has been inserted vide Finance Act. 2015 w.e.f. 01.06.2015. With this insertion, it is now possible to revise the order passed u/s 143(3) of the Act. In the instant case, clause (a) & (b) of the Explanation 2 of Section 263 of the I.T. Act 1.961 is clearly applicable since nowhere in the assessment record, there is evidence that any query/verification in respect of issues involved in this case, as discussed in the foregoing paragraphs has been made by the AO concerned. For the sake of brevity, Explanation 2 to section 263 (1) has been reproduced here under: “263. Revision of orders prejudicial to revenue.
A.Y.14-15 Sh. Karanbhai M Patel 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 tinder section 1 19: 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 ease of the assessee or any other person.”
Therefore, in view of above facts and observations, the ld PCIT held that it is clear that the assessment order passed by the AO concerned suffers from lack of enquiries at his end on the impugned issues which ought to have made in this case. Hence, ld PCIT held that assessment order u/s 143(3) of the I.T. Act, 1961 in the case of Shri Karankumar Manjibhai Dungrani for A.Y. 2014-15 passed on 26.12.2016, by the Assessing Officer is erroneous in so far it is prejudicial to the interest of revenue. Therefore, ld PCIT set-aside the order of AO with the direction to frame the assessment De novo.
Aggrieved by the order of the Ld. PCIT, the assessee is in appeal before us.
19.Learned Counsel for the assessee argues before the Bench that ld PCIT has not applied his mind and initiated the revision proceedings based on the proposal of revision u/s 263 made by the Assessing Officer. The copy of the said proposal of the assessing officer, was obtained by the assessee through Right To Information (RTI) and certified copy is enclosed in paper book page-2 of the assessee. The Ld. Counsel contended that there is no application of mind by the Ld.PCIT, and the revision proceedings were initiated by ld PCIT at the instance of the assessing officer, hence, revisional jurisdiction u/s 263 has vitiated and for that the Ld. Counsel relied on the judgment of Co-ordinate Bench of Pune in the case of Alfa Laval Lund vs. CIT(IT/TP), Pune in dated 02.11.2021.
20.The Ld. Counsel further submitted that assessment was selected for limited scrutiny by the Assessing Officer for verification of “assets and liabilities and Cash Deposits”, however, the Ld.PCIT has exercised his jurisdictional power on A.Y.14-15 Sh. Karanbhai M Patel the issue which is not covered by limited scrutiny, hence order of ld PCIT may be quashed.
The ld Counsel took us through the paper book page No.338, wherein Assessing Officer has issued notice u/s 142(1) of the Act calling details of cash deposits and details of assets and liabilities. In response to the said notice, the assessee submitted its reply, which is placed at paper book page-18. Therefore, Ld. Counsel also argued that whatever query raised by the Assessing Officer, during the assessment stage, has been replied by the assessee, hence, the AO has applied his mind, therefore assessment order passed by the assessing officer is neither erroneous nor prejudicial to the interest of revenue.
22.On the other hand, Ld CIT-DR for the Revenue submitted that during the revisional proceedings, the Ld.PCIT has applied his mind and he has issued notice u/s 263 independently and without any borrowed satisfaction. In para No.2 of his notice, he has mentioned as follows:
“2. On perusal of Scrutiny records, following points were noticed….” This shows that ld PCIT has applied his mind. Moreover, the notice issued by ld PCIT, u/s 263 has been signed by ld PCIT (himself) and not by assessing officer. The notice issued by ld PCIT, u/s 263 has been dated and served on the assessee during the revisional proceedings. Hence, there is no borrowed satisfaction and ld PCIT has applied his own mind. No doubt, the Ld.PCIT may take the assistance from the lower authorities, working below him to obtain the information, however, ultimately, the Ld.PCIT has issued notice u/s 263 with his signature. Just to copy paste some para of the proposal submitted by AO does not mean that ld PCIT has not read the relevant para and not applied his own mind. The Ld.PCIT has applied his mind and issued the notice. After getting the information from AO, the ld PCIT has applied his own mind, therefore, the Ld.PCIT has not exercised his jurisdictional power at the instance of Assessing Officer.
A.Y.14-15 Sh. Karanbhai M Patel 23. The Ld. CIT-DR also submitted that assessee’s case was selected for limited scrutiny to verify the “cash deposits and to verify the assets and liabilities”. The issue raised by Ld.PCIT falls in “assets” , therefore the issue raised by Ld.PCIT is very much within the scope of the limited scrutiny. The Ld. CIT-DR also submitted that assessment order does not mention about the limited scrutiny. However, the assessee has taken this information from the Department by way of filing RTI information but even then the issue raised by ld PCIT falls in the items of limited scrutiny “assets”. Therefore, powers exercised by Ld.PCIT is within the law.
The Ld. CIT-DR also submitted that the assessment order passed by Assessing Officer is cryptic order, as nowhere he has mentioned that he has verified the cash deposits and assets and liabilities. Therefore, even items mentioned in the limited scrutiny, have not been examined by assessing officer. The Ld. CIT-DR also stated that just to submit the details before the Assessing Officer should not enough, if the Assessing Officer has not examined them. If the Assessing Officer takes the details from the assessee and does not examine them and just put in the assessment records, does not mean that Assessing Officer has applied his mind. Therefore in the assessee’s case under consideration, the Assessing Officer has not applied his mind and it is a case of complete lack of enquiry i.e no enquiry at all, has been done by the Assessing Officer in respect of the issue raised by ld PCIT. Therefore, order passed by the assessing officer is erroneous as well as prejudicial to the interest of Revenue.
We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. We note that first contention of ld Counsel is that ld PCIT has not applied his mind and initiated the revision proceedings based on the proposal of revision u/s 263 made by the Assessing Officer. In order to understand, whether ld PCIT has applied his mind while initiating the revision proceedings u/s 263 of the Act, first we have to go through the notice issued by ld PCIT under section 263 of the Act, which is reproduced below for ready reference:
A.Y.14-15 Sh. Karanbhai M Patel No.SRT/Pr.CIT-1/u/s263/KMD/2018-19 Date 16.10.2018 'To. PAN-AHNPD9673L Shri Karanbhai Manjibhai Dungrani 14, Akhandanand Society, B/h Vishal Nagar, Adajan Road, Surat Sir, Sub: Show cause notice u/s. 263 of the I.T. Act, 1961 in the case of Shri Karanbhai Manjibhai Dungrani for A.Y. 2014-15- regarding- On verification of the return of income, details available on record, and the assessment order u/s. 143(3} of the I.T. Act, 1961 dated 26.12.2016 for A.Y. 2014-15 in your case, the following facts are observed:
1. 1. During the year under consideration, you are having (ij salary income being an employee to M/s Jay Fun Park Pvt Ltd & (if) Rental income on account of letting out godown. You are also a partner in M/s Gopal Builders. You have filed had filed your return of income for A.Y. 2014-15 on 30.08.2015 declaring total income at Rs.2,14,47,360/-. Scrutiny assessment u/s. 143(3) of the Act was finalized on 30.12.2016- accepting the returned income.
2. On perusal of Scrutiny records, following points were noticed: 2.1 A survey operation was carried out on 26.10.2013 in the case of M/s Gopal Builders in which you are a partner. During the course of survey action, a document in the nature of a hand written agreement dated 12.03.2013 in plain paper regarding purchase of Plot. 337 Village Atodara, District Olpad by you and Shri Nilesh P Vaghasia from Mullinuddin Ilmodin Mirza on behalf of Ibrahim Sheikh Rasul, Yashmin Hamid Sheikh and Arif Hamid Sheikh was found and impounded from premise at 93, Akhandanand Society & inventorized as page 194 of Annexure B.FI-1. As per this document, the area of the land is 8.84 Bigha and @ Rs.32,51,786/- per bigha the total purchase price agreed is Rs.2,87,45,788/-. As per the impounded document, the first installment of Rs. 1,00,00,000/- was to be paid on 12.04.2013, the second installment of Rs.50,00,000/- was to be paid on 01.05.2013, the third installment of Rs.60,00,000/- was to be paid on 12.08.2013 and the fourth installment of Rs.77,45,000/- was to be paid on 12.10.2013. During the course of survey action, statement of your father Shri Manjibhai Dungrani, was recorded wherein he had made a disclosure of Rs.1,53,00,000/- in your hands on account of unaccounted investment in the said land Plot No.337, Village Atodara, District Olpad. During the assessment proceedings in the case of the firm, M/s Gopal Builders for the AY.2014-15, it was stated in submission dated 27.12.2016 that despite conveyance deed in April, 2013, regarding purchase of the said land, payment of Rs.1,37,45,000/- was not made as possession of the land was not given due to part encroachment and therefore the amount of Rs.1,37,45,000/- was not offered for taxation and the disclosure made of Rs. 1,53,00,000/- was adequate.
A.Y.14-15 Sh. Karanbhai M Patel However, the basic presumption in case of documents found in search and survey is that the transactions recorded are true and when transactions are recorded for future dates if the transaction has been carried out, same should be considered at the value given in impounded/seized papers. In the instant case, the said transaction in land is completed as accepted in the submission. Thus it is to be understood that the payment on future dates would also have been made. No sane person who has agreed to sale land for Rs.2,87,45,788/- would make the sale for just Rs.1,53,00,000/-. Further it has been accepted that you have only S3% share in the land. Whether the ownership of the remaining 47% is in just a dummy name or in name of some real person has not been investigated. These facts have been accepted without proper verification which has 180 to 196 of the loose paper file impounded as BFI-1 from the premise at 93, Akhandanand Soceity, Adajan, Surat which are copies of various bills, vouchers etc are also related to the purchase by you of the above stated land at Survey No.337, Village Atodara District Olpad. Some of the vouchers and copies impounded cite cash payments while some others are incomplete and do not give details of persons who have made the cash payments. These details were required to be verified and cross-tallied to find out the correctness of the disclosure amounts and also for initiation of consequential action in case of the other persons involved like Ibrahim Rasul Sheikh, Yashmin Hamid Sheikh, Arif Hamid Sheikh, Zubin Mirza Nilesh P Vaghana etc. who are party to the transactions. These facts have been accepted without proper verification which has resulted in the assessment order being erroneous and prejudicial to revenue. In view of the above facts and provisions of law, the assessment order passed u/s. 143(3) of the I.T. Act, 1961 in your case for A.Y. 2014-15 is considered erroneous and prejudicial to the interest of the revenue.
3. As the above irregularities to the extent of points discussed above, are erroneous and prejudicial to the interest of Revenue, action u/s. 263 of the I.T. Act, 1961 is required to be taken in your case for A.Y. 2014-15. It is accordingly proposed hereby to revise the assessment made vide order u/s. 143(3) dated 26.12.2016 in your case for A.Y.2014-15 under section 263 of the I.T. Act, 1961.
4. However for the sake of natural justice, you are hereby being provided an opportunity of being heard to offer explanation if any, as well as to adduce evidence, if any, against the proposal of revision u/s.263 of the Income Tax Act, 1961.
The hearing in your case for the above purpose is hereby fixed on 26.10.2018 at 11:30 A.M. before the undersigned at Room No.123, Aayakar Bhavan, Majura Gate, Surat. or through a representative duly authorized in this behalf. If you do not wish to attend personally or through an authorized representative, that you may submit written explanation which must reach this office on or before the date of hearing fixed ass above.
6. In the event of your failure to comply to this show cause letter, it will be understood that you have no explanation to put forth and no evidence to adduce to support and substantiate your claim, and accordingly, order u/s 263 of the I.T.
A.Y.14-15 Sh. Karanbhai M Patel Act, 1961 will be passed on merits on the basis of material available on record without affording any further opportunity Sd/- Rajiv Vijay Nabar PR. CIT, SURAT-1” 26.From the above show cause notice issued u/s 263 of the Act, it is vivid that the notice is dated and signed by Ld.PCIT and issued to the assessee and served on the assessee. Thus, ld PCIT has verified himself the assessment records and applied his mind to issue notice under section 263 of the Act, therefore, it is not a borrowed satisfaction. Hence, it cannot be said that the order passed by Ld.PCIT u/s 263 is at the instance of the lower authorities. Thus, we find merit in the submission of ld DR for the Revenue to the effect that Ld.PCIT has applied his mind and he has issued notice u/s 263 independently and without any borrowed satisfaction. In para No.2 of his notice, he has mentioned as follows:
“2. On perusal of Scrutiny records, following points were noticed….” This shows that ld PCIT has applied his mind. Therefore, we note that just to receive the information from the assessing officer on the issue raised by ld PCIT does not vitiate the jurisdiction of ld PCIT under section 263 of the Act.
We note that Ld. Counsel contended that there is no application of mind by the Ld. PCIT and relied on the judgment of Co-ordinate Bench of Pune in the case of Alfa Laval Lund vs. CIT(IT/TP), Pune in dated 02.11.2021, wherein it was held as follows:
3. We have heard both the sides through Virtual Court and gone through the relevant material on record. It can be seen from para 4 of the ld. CIT‟s order that: “A proposal for revision u/s 263 of the IT Act, 1961 was received from DCIT(IT)-1, Pune through the Jt.CIT(IT), Pune vide letter No. Pn/Jt.CIT(IT)/263/2016-17/61 dated 23.05.2016 . It is thus manifest that the edifice of the revision in the extant case has been laid on the bedrock of receipt of the proposal from the AO…….”
We note that Co-ordinate Bench of Pune in the case of Alfa Laval Lund(supra) held that ld PCIT in his revision order stated that “A proposal for revision u/s 263 of the IT Act, 1961 was received from DCIT(IT)-1”, and based on this proposal, ld PCIT has initiated proceedings under section 263 of the Act. We note that in assessee`s case under consideration, nothing is mentioned in the show
A.Y.14-15 Sh. Karanbhai M Patel cause notice issued by ld PCIT that he has received the proposal from assessing officer. We have also gone through the order passed by ld PCIT under section 263 of the Act and find that no such conclusion reached by ld PCIT that he has initiated the revision proceedings based of the proposal of assessing officer or at the instance of the assessing officer. Therefore, judgment cited by ld Counsel in the case of Alfa Laval Lund(supra) does not have any assistance to the assessee under consideration.The ld Counsel submitted before us a copy of the letter of the assessing officer, who has informed to the ld PCIT, about income escaped assessment. The said copy of the letter was obtained by the assessee through Right To Information (RTI) and certified copy is enclosed in paper book page-2 of the assessee. We note that it is an internal document of the Revenue Department to exchange information. No doubt, ld PCIT got the information from the assessing officer, however, after getting such information the ld PCIT has scrutinized all assessment records including assessment order, he has applied his mind and issued show cause notice u/s 263 after recording his own findings. The ld PCIT has neither mentioned this fact ( that he received proposal from AO) in his show cause notice u/s 263 nor in his revisional order u/s 263 of the Act. Therefore, the contention of ld Counsel that ld PCIT has initiated his revision proceedings based on borrowed satisfaction is not acceptable.
We note that Hon`ble Bombay High Court in the case of Vedanta Ltd (2021) 124 taxmann.com 435 held that:
Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment year 2008-09 - Subsequent, to passing of final assessment order, Commissioner issued revision notice based on reports of Serious Fraud Investigation Office (SFIO) and Justice Shah Commission after noting that there was under-invoicing which was not considered while issuing assessment order - After hearing assessee's objections, revisional order was passed setting aside assessment order and Assessing Officer was directed to pass fresh assessment order - On appeal, Tribunal held that since only direction was issued for passing fresh assessment, issues raised by assessee could always be gone into by Assessing Officer after granting full opportunity to assessee - Whether since assessment was completed without proper inquiries, it was competent for Commissioner to invoke revisional jurisdiction and direct fresh assessment - Held, yes [Paras 24 and 26] [In favour of revenue]
A.Y.14-15 Sh. Karanbhai M Patel 30.Hence, we note that mere getting information is not a borrowed satisfaction. In the above noted judgment of Hon`ble Bombay High Court in the case of Vedanta Ltd (supra), subsequent, to passing of final assessment order, Commissioner issued revision notice based on reports of Serious Fraud Investigation Office (SFIO) and Justice Shah Commission after noting that there was under- invoicing.Thus, we note that ld PCIT has scrutinized all assessment records including assessment order, he has applied his mind and issued show cause notice u/s 263 after recording his own findings, therefore contention raised by ld Counsel, in this respect is hereby rejected.
The second contention raised by the Ld. Counsel is that assessee`s case was selected for limited scrutiny by the Assessing Officer for verification of “assets and liabilities and Cash Deposits”, however, the Ld.PCIT has exercised his jurisdictional power on the issue which is not covered by limited scrutiny. We do not agree with the arguments of Ld. Counsel to the effect that assessee’s case was selected for limited scrutiny for verification of cash deposits and verification of assets and liabilities, whereas the Ld.PCIT in his order u/s 263 has raised a different issue. We note that issue raised by ld PCIT is covered under “assets” which is covered under the scope of limited scrutiny. Therefore, order passed by the Ld.PCIT is tenable in the eyes of law, thus arguments advanced by ld Counsel are not acceptable.
The third contention raised by ld Counsel is that during the assessment stage, the query raised by the assessing officer by way of issue of notice under section 142(1), have been replied by the assessee, therefore order passed by the assessing officer should not be erroneous. We note that issue raised by ld PCIT has not been examined by the assessing officer and this fact is getting reflected by the assessment order itself. The order passed by the assessing officer is reproduced below: “ASSESSMENT ORDER Return of income for A.Y 2014-15 declaring income of Rs.2,14,47,360/- was filed by the assessee on 30/-8/2015. Consequent to selection of the case for scrutiny, statutory notice u/s 143(2) of the I.T. Act dated 29/07/2016 was issued by post
A.Y.14-15 Sh. Karanbhai M Patel and was served in time. subsequently, the case was transferred to Circle 1(3) Surat and notice u/s 129 r.w.s. 142(1) dated 13/10/2016 has been issued on account of change in incumbent Assessing Officer, calling for further details, documents and explanation relevant to the case. The Authorized Representative of the ae, Shri Asuthsh P Nanavaty, CA attended on various dates and the case was discussed with him. Details, documents and explanations submitted in the case have been examined and placed on record. After verification of details, documents and explanations, test check of books of accounts and supporting vouchers and discussion with the AR, the income returned by the assessee is accepted. Assessed u/s 143(3) of the I.T. Act at the returned income of Rs.2,14,47,360/-. Calculate tax and interest accordingly. Give credit for pre-paid taxes. Issue necessary forms.”
From the above assessment order, it is vivid that what the talk about examination of the issue raised by ld PCIT, even there is no findings of the assessing officer about the items selected for limited scrutiny. We note that assessee`s case was selected for limited scrutiny for verification of assets and liabilities and cash deposits, however there is no findings of the assessing officer about these items. The issue raised by ld PCIT under section 263 of the Act falls within the items for limited scrutiny, namely ‘assets’, and assessing officer has not applied his mind to examine the issue raised by ld PCIT, hence assessment order passed by the assessing officer is erroneous and prejudicial to the interest of Revenue.
We are aware of the fact that the Assessing Officer’s role while framing an assessment is not only an adjudicator. The AO has a dual role to dispense with i.e. he is an investigator as well as an adjudicator; therefore, if he fails in any one of the role as afore-stated, his order will be termed as erroneous.The position and function of the ITO is very different from that of a civil Court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil Court in the absence of any rebuttal. The civil Court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The ITO is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when A.Y.14-15 Sh. Karanbhai M Patel the circumstances of the case are such as to provoke an inquiry. GEE VEE ENTERPRISES, 99 ITR 375 (Del).
Let us take the guidance of judicial precedents laid down by the Hon’ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer’s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer’s order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon’ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. “prejudicial to the interest of the revenue’’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue “unless the view taken by the Assessing Officer is unsustainable in law”. 36.Taking note of the aforesaid dictum of law laid down by the Hon’ble Apex Court, and considering the facts of the assessee, we note that assessing officer has failed to conduct enquiry and failed to examine the issue raised by ld PCIT,
A.Y.14-15 Sh. Karanbhai M Patel therefore in the conclusion we are of the view that the reasons set out by the ld PCIT for invoking the jurisdiction u/s 263 of the Act are sustainable in the eye of law, hence we confirm the findings of ld PCIT and dismiss the appeal of the assessee.
In the result, appeal filed by the assessee is dismissed.
Order is pronounced on 10/02/2023 by placing record on notice board.