MR. AMARJEET DHALL,LUDHIANA vs. CIT, LUDHIANA

Per Sanjay Garg, Judicial Member:

These appeals have been preferred by the different assessees

who were parties to the same transaction of sale of land. ITA No.

366/Chd/2012 and 263/Chd/2012 are appeals preferred by the

assessee Shri Amarjeet Dhall, purchaser and Shri Tarsem Singla,

Seller respectively challenging the revision order of the

Commissioner of Income Tax (herein referred to ‘ CIT’) passed u/s

263 of Income-tax Act, 1961 (in short 'the Act') whereas ITA

Nos.148/chd/2014 &369/Chd/2014 have been preferred by the above

said assessees respectively agitating the action of CIT (Appeals) in

upholding the additions made by the Assessing officer in the

assessment proceedings carried out u/s 143(3) read with section 153A

of the Act in compliance of the directions issued by the CIT in his

order passed u/s 263 of the Act. The revenue has come in appeal

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vide ITA No. 459/Chd/2014 agitating against the partial deletion of

the addition by the CIT(A) in the case of assesse Tarsem Singla

(seller). For the sake of convenience, the facts have been culled out

from ITA No.366/Chd/2012 in the case of Sh. Amarjeet Dhall.

dated 31.1.2012 are that a search action u/s 132 of the Income Tax

Act was carried out at the residential premises of Shri Amarjit Dhall

and his family members on 26.8.2008. During the search operation,

some incriminating documents were found and seized. From these

papers, it was gathered that the assessee had entered into some

transactions of purchase of land @ Rs. 2850/- per square yard with

Sh. Tarsem Singla. Two sale deeds were also found which showed the

purchase of 14 kanas ½ Marla of land by the assessee Shri Amarjit

Dhall at Village Dolo Khurd. One registration deed dated 7.11.2006

was between Shri Jagjiwan Pal and Shri Amarjit Dhall for 7 Kanal ½

marla for Rs. 4,70,000/- and another registered deed dated

13.12.2006 was between Shri Tarsem Singla and Shri Amarjit Dhall

for Rs. 4,74,000/- for 7 Kanals.

Assessing Officer (AO) u/s 153A of the Income Tax Act (in short

‘the Act’), when asked, assessee explained that rate of Rs. 2,850/-

per sq. yd. mentioned in the seized documents was not the purchase

consideration of the said property but these were the details and

calculations of proposed budget/expenditure in respect of the

contract proposed to be entered into by the assessee with Shri Tarsem

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Singla for construction of a Farm House on the said land. Since the

transaction did not mature due to dispute on the scope of work, its

cost and other items and conditions between both the parties, the said

contract was cancelled. The Assessing officer accepted the assessee’s

explanation and made no addition on account of the same. The

assessment was completed u/s 153A read with section 143(3) of the

Act by the Assessing officer vide order dated 24.12.2010.

Assessing officer for taking appropriate remedial action in the matter

stating that the version of the assessee had been accepted without

making discrete inquiries and without ascertaining the facts with

regard to the market rate of the land prevailing at that time.

The Ld. CIT after considering the facts issued show cause notice to

the assessee u/s 263(1) of the Act seeking assessee’s objection

against the proposed action u/s 263 of the Act. The assessee

explained that the title deed of the respective properties was

registered in the name of assessee on 7.11.2006 and 14.12.2006

whereas as per the seized documents the alleged payment was dated

8/12/2006, 22/12/2006 and 26/12/2006 and 13.1.2007 which dates

were subsequent to the date of registration of sale deeds in question.

It was the case of the assessee that had the purchase consideration

been passed on the dates as alleged by the Department, the seller

would have got the title deeds transferred in the name of the assessee

only after receiving full and final payment because there was no

regular dealing between the parties to the deal. It was also submitted

that the assessee had purchased agricultural land from two different

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sellers on different dates and not from Shri Tarsem Singla only as

was alleged by the Department. That the assessee withdrew only a

sum of Rs. 10 lacs from the bank for the above deal and there was no

evidence that the assessee was possessed with any cash which

allegedly exchanged the hands. That even in the seized documents,

there was no mention of payment of Rs. 4.75 lacs made to Shri

Jagjiwan Pal on 7.11.2006 and Rs. 4.75 lacs made to Shri Tarsem

Singla on 14.12.2006.

There were different measurements at page 99 of the seized

documents and back side of that page, suggested that the assessee

and the seller Sh. Tarsem Singh were not sure about the size of the

combined plot. Had both plots been sold by Mr. Tarsem Singla, there

would have been only one measurement. That there was no evidence

that any consideration was passed except the consideration written in

the sale deed. Regarding the calculation mentioned in the seized

documents, it was explained that a project of farm house was

discussed with Shri Tarsem Singla and the assessee got the map of

the proposed farm house prepared from his architect/consultant,

which included servant quarter, swimming pool, tennis court,

gymnasium, sewerage works etc. The average cost of Rs. 2,850/- per

sq. yard was worked out in for the construction of the said farm

house project on the entire land including the land purchased by the

assessee from Sh. Jagjiwan Pal. However, later on the project of

construction of the farm house including the above mentioned works

was cancelled and the amounts estimated relating to this work were

reduced from the total contract and no amount in respect of

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farmhouse project was paid. The Ld. CIT did not agree with the

above explanation given by the assessee and initiated revisionary

proceedings u/s 263 of the Act.

conducted enquiries in respect of the matter. He directed the

DCIT(HQ)(C) to record statement of the assesse. Statement of seller

Tarsem Singla was also recorded. Inquiries were also got conducted

through the DDIT(Inv.) Chandigarh who recorded the statement of

the concerned architect / consultant about the estimate of farm house

prepared by them. The statement of Smt. Anupam Sharma partner in

M/s Vivek Consultants was recorded u/s 131 of the Act and thereafter

at the request of the assessee she was also cross examined.

Thereafter considering the reply / objections of the assessee on

various issues, the Ld. CIT rebutted/tried to rebut the same with his

own reasoning and assumptions and held that the Assessing Officer

had not made proper and adequate inquiries on these issues. The Ld.

CIT, therefore, concluded that it was a case of further enquiry which

the Assessing officer had failed to make and, therefore, the order of

the Assessing officer was erroneous in so far as it was prejudicial to

the interest of Revenue. The Ld. CIT, therefore, held that it was

apparent that the Assessing officer had not properly appreciated the

facts of the case and committed a grievous error in not conducting

proper inquiries with regard to the entries made in the above

documents and thereby not making the addition. He, therefore, set

aside the order dated 24.12.2010 passed by the Assessing officer u/s

153A read with section 143(3) of the Act and directed the Assessing

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officer to make fresh assessment de novo after affording an

opportunity of hearing to the assessee.

Being aggrieved by the above action, the assessee has come in

appeal before us.

been that the Assessing officer during the assessment proceedings

had made the adequate inquires and that after having satisfied from

the explanation of the assessee, he did not choose to make any

addition on this issue. The assessment order in question was passed

by the Assessing officer after getting the prior approval from the

Addl. CIT (Central Range – Ludhiana) as per the provisions of

section 153D of the Act which showed that not only the Assessing

officer but his higher officer i.e. concerned Addl. CIT had also

applied his mind. Thereafter, there was nothing new that came into

the knowledge of the Assessing officer that prompted him to make a

proposal to the Ld. CIT to exercise his revisionary jurisdiction u/s

263 of the Income Tax Act. He has further contended that it cannot

be said that the order of the Assessing officer was erroneous and

prejudicial to the interest of Revenue. That the action of CIT u/s 263

of the Act was nothing but change of opinion that too was on the

basis of proposal of the Assessing officer . That even the said

documents seized during the search action could not be related to the

sale deed in question as neither the dates nor the area mentioned in

the said document matched with the date and area mentioned in the

sale deed executed by Sh. Tarsem Singla in favour of the assesse.

The assessee vide two separate sale deeds had purchased the property

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form two persons i.e. from Shri Tarsem Singla and Shri Jagjiwan Pal.

The area mentioned in the alleged documents also included the land

purchased by the assessee from Shri Jagjiwan Pal. That the price

mentioned in the sale deed was higher than the Collector rate. That a

search action was also carried out at the premises of seller Sh.

Tarsem Singla by the Income Tax authorities but nothing

incriminating was found. That a survey action was also carried out by

the Department at the premises of the consultant / Architect and even

there nothing incriminating was found against the assessee. That

during the original assessment proceedings u/s 153A, the Assessing

officer had properly enquired the matter and accepted the explanation

of the assessee about the alleged seized documents and the view

formed by the Assessing officer was one of the possible view

especially in the absence of any corroborative evidence to prove that

the own money had exchanged hands. He has further relied upon a

catena of judgements to stress that where the AO has applied his

mind and the view taken by him is one of the possible views, then the

order cannot be said to be erroneous or prejudicial to the interest of

Revenue, even, if the Commissioner has a different view from that of

the Assessing officer and that where the AO has made enquiries in

respect of the claim of the assessee, order cannot be said to be

erroneous even if the details of enquiries made do not find mention

in the assessment order.

has been made by the CIT merely on assumptions. That the assessee

simultaneously had purchased land from Shri Jagjiwan Pal which was

366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 9

also adjoining to the land purchased from Shri Tersam Singla and

was also almost on same rate, however, the purchase price in respect

of land purchased from Shri Jagjiwan Pal has been accepted. That a

revision order has also been passed in the case of Shri Tersam Singla

making the addition in his case, however, no addition has been made

in the case of other seller Shri Jagjiwan Pal. That when the

Department has accepted the sale price of the land in the case of one

of the assessee Shri Jagjiwan Pal, then additions were not warranted

in the case of other assessees in respect of the same transaction. That

the sale price mentioned in the registered deed was to be accepted in

the absence of any other evidence. That the Department has estimated

the sale price at a rate which is 60 - 70 times higher than the

Collectorate rate and the difference in valuation pointed out by the

Department is extraordinary high and otherwise seems to be

improbable. In respect of the consequential appeal of the assessee

against the order of the CIT(A) confirming the additions made by the

Assessing officer in the assessment made by the AO in compliance

of the directions of CIT, the Ld. counsel has summited that no

further inquiries have been made by the Assessing officer while

framing the assessment in question. The Assessing officer only

repeated the observations of the CIT as contained in the order passed

u/s 263 of the Act and made the impugned additions. Even Ld.

CIT(A) also reiterated the version of the CIT u/s 263 of the Act and,

hence, the additions made by the lower authorities were not based on

any cogent and convincing evidence.

366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 10

provisions of section 263 of the Act.

“Section 263(1) in The Income- Tax Act:

(1) The 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 2 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. ………”

summarized in the following points:

1) The Commissioner may call for and examine the record of any proceeding under the Act;

2) If he considers that the order passed by the AO is (i) erroneous; and (ii) is prejudicial to the interest of Revenue; 3) He has to give an opportunity of hearing in this respect to the assessee; and

4) He has to make or cause to make such enquiry as he deems necessary;

5) He may pass such order thereon as the circumstances of the case justify including,

366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 11

(i) an order enhancing or, (ii) modifying the assessment or (iii) cancelling the assessment and directing a fresh assessment.

u/s 263 of the Act, the Ld. CIT conducted / got conducted so many

inquiries himself and through his subordinate officials which

included recording of statements of assessee, of the seller and even

of the architect / consultant and still he did not choose to make

addition on the basis of the evidence / conclusion of those inquires

but was of the view that it was the case of further inquiries and,

therefore, remanded the matter to the Assessing officer for de novo

assessment. However, a perusal of the assessment order passed by the

Assessing officer u/s 153A of the Act read with Rule 143(3) and

section 263 of the Act reveals that the Assessing officer did not

chose to make any further enquires and even no new evidence came

into his possession pointing any exchange of on money between the

assesse Shri Amarjeet Dhall and Sh. Tarsem Singla. He made the

impugned additions on the basis of observations made by the CIT(A)

in the order passed u/s 263 of the Act. The moot point which is to be

considered here is that when the Ld. CIT himself was of the view that

it a case of further enquiry and did not think it appropriate to made

addition on the basis of evidence /enquiries made during proceedings

u/s 263 of the Act, then can the Assessing officer be said to be

justified in making additions solely based on the observation made

by the CIT in his order u/s 263 of the Act?. Further, a perusal of

366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 12

the entire order of the CIT passed u/s 263 of the Act also reveals

that no cogent and convincing evidence was found from the inquiries

made during the proceedings before him, rather, he had made certain

assumptions and presumptions from which he derived certain

conclusions negating the explanation given by the assessee. However,

no convincing, reliable or corroborative evidence was found to

conclude that on money had been passed on by the assessee to the

sellers. The ld. CIT, therefore, concluded that it was a case of further

inquiry and that is why he remanded the matter back to the file of the

Assessing officer to make de novo assessment.

of hearing as to whether any fresh inquiries were made by the

Assessing officer or any new material evidence has come to the

knowledge or possession of the assesse during the assessment

proceedings carried out in compliance of the directions of the CIT

justifying the impugned additions, to which the Ld. DR has been fair

enough to admit that it does not so reveal from the order of the

Assessing officer.

Even in appeal, the Ld. CIT(A) has also repeated the

observations of the CIT made in the order passed u/s 263 of the Act.

Under the circumstances, without any new evidence, coming on the

file, the additions made by the Assessing officer cannot be held to be

sustainable in the eyes of the law.

The another important fact in this case is that the area

mentioned in the alleged document did not match with the area of the

sale deed executed by Shri Tersam Singla in favour of the assessee.

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If the area of the land sold by Shri Jagjiwan Pal is included, then

surprisingly, the Department has not chosen to take any remedial

action or to make any addition in the case of Shri Jagjiwan Pal. The

entire addition has been made on account of unexplained investment

taking into consideration the land purchased by the assesse from Sh.

Tarsem Singla as well Sh. Shri Jagjiwan Pal. On the other hand, the

corresponding addition has been made into the income of Shri

Tersam Singla. The action of the Department in accepting the sale

price as such in the case of one seller (Jagjiwan Pal) without making

any further addition, whereas, making addition in the case of the

another seller (Tarsem Singla) assuming the sale price 60 – 70 times

higher than the collector rate and without bringing any evidence on

the file about the market rate, cannot be held to be justified. It is also

to be noted that the sale price mentioned in the sale deed is more

than Collector rate. Neither the dates nor the area mentioned in the

said document matched with the date and area mentioned in the sale

deed executed by Sh. Tarsem Singla in favour of the assesse. The

alleged dates of payment mentioned in the seized document are after

the dates of the execution of the registered sale deeds. There being

no evidence on the file from which it can be gathered that any on

money has been passed to the seller. In view of the above

discussion, the addition made/confirmed by the lower authorities can

not be held to be justified. The same are accordingly ordered to be

deleted.

authorities on merits, hence, at this stage any discussion about the

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validity of the order passed u/s 263 of the Act will be rendered

academic in nature. This issue is left open to be adjudicated at an

appropriate stage, if need be.

14 Now coming to the appeals of the assesse i.e. ITA

No.263/Chd/12 challenging the exercise of revision Jurisdiction by

the CIT under section 263 of the Act and the cross appeals relating to

the quantum additions i.e ITA Nos. 369/Chd/2014 by the assessee

and 459/Chd/2014 by the Revenue in the case of Shri Tarsem Singla.

ITA Nos. No.263/Chd/12 & 369/Chd/2014 and ITA No. 459/Chd/2014:

made the addition on the basis of conclusion arrived at in the case of

Shri Amarjeet Dhall (Purchaser). This was done pursuant to the

directions issued by the CIT in the order passed under section 263 of

the Act based on the findings of the CIT in the order passed u/s 263

in the case of purchaser Sh. Amarjeet Dhall.

However, in appeal before the CIT(A) against quantum

additions made by the Assessing Officer, the Ld. CIT(A) restricted

the additions to the extent of property sold by Shri Tarsem Singla

and deleted the additions relating to the land purchased by Shri

Amarjeet Dhall from Shri Jagjiwan Pal holding that the additions

cannot be made in the hands of the assessee Shri Tarsem Singla in

respect of land sold by Shri Jagjiwan Pal. Thus the assessee, apart

from challanging the validity of the order passed u/s 263 of the Act

by the CIT, has also come in appeal challenging the confirmation of

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addition up to the extent of the area of land sold by him, whereas, the

Revenue has come in appeal challenging the action of the CIT(A) in

deleting the remaining additions relating to the land sold by Shri

Jagjiwan Pal.

have deleted the additions made in the case of Shri Amarjeet Singh

Dhall, the consequential additions made in the case of assessee, Shri

Tarsem Singla are not sustainable in the eyes of law.

Even, there is an interesting fact in this case. The search

action was carried out in the premises of Shri Tarsem Singla and no

incriminating material was found. Therefore, the AO in the

proceedings carried out u/s 153A of the Act did not make any

additions on this issue. However, the additions were subsequently

made in the case of the assessee Shri Tarsem Singla on the basis of

directions issued by Ld. CIT in an order passed u/s 263 of the Act

taking into consideration his (CIT’s) observation made in the case of

purchaser Shri Amarjeet Dhall. As per the settled law, the additions

cannot be made u/s 153A of the Act in the absence of any

incriminating material found during the search action. Reliance in

this respect can be placed on various judicial decisions including

the decision of the Hon'ble Bombay High Court in the case of ‘CIT

Vs. Murli Agro Products Pvt Ltd’, (2014) 49 taxman.com 172

(Bom.), ITA No.36 of 2009 and in the case of ‘CIT Vs. Continental

Warehousing Corporation’ ITA No. 523 of 2013 reported in (2015)

279 CTR 0389 (Bombay) and of the Hon'ble Delhi High Court in the

case of ‘CIT Vs. Kabul Chawla’ 234 Taxman 300 (Delhi) and

366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 16

subsequent decision of the Delhi High Court in the case of ‘Principal

CIT Vs. Meeta Gutgutia Prop M/s Ferns ‘N’ Petals”, ITA 306/2017

and others decided vide order dated 25.5.2017.

incriminating material found in the course of search made at the

premises of other person namely Shri Amarjeet Dhall, hence, the

assessment in the case of the assesse Tarsem Singla could have been

made in the assessment framed u/s 153C of the Act and not u/s

153A of the Act. Admittedly, no action has been initiated in the case

of assessee Shri Tarsem Singla by the Income Tax authorities u/s

153C of the Act. The addition so made, thus, are not sustainable in

the eyes of law in view of this legal proposition also.

In view of this, the additions made in the case of Shri Tarsem

Singla are also ordered to be deleted. There is no merit in the appeal

of the Revenue and the same is accordingly dismissed.

assessees u/s 263 of the Act (ITA Nos. 366/Chd/2012 &

263/Chd/2012) are dismissed having become infructuous and being

rendered academic in nature and the issue taken therein as to the

validity of the proceedings carried out u/s 263 of the Act is left open

to be adjudicated at an appropriate stage, if need so.

The appeals bearing ITA Nos. 148/Chd/2014 and ITA

No. 369/Chd/2014 challenging the additions on merits are hereby

366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 17

allowed. The appeal of the revenue bearing ITA No. 459/Chd/2014 is hereby dismissed.

Order pronounced in the Open Court on 21.05.2018

Sd/- Sd/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 21.05.2018 Rkk Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR