CHANDRA PRABHA,GHAZIABAD vs. PR. CIT, , GHAZIABAD

The assessee has challenged the revisional order passed by the Ld. Pr.CIT as per the grounds noted herein.

“1. That the impugned order passed u/s. 263 of the Income Tax Act 1961 is bad in law and needs to be set aside. 2. That there were no provision to issue multiple notices u/s. 263, which is illegal and against the provisions of the ‘the Act’. 3. That the provision of the section 151(2) was not complied with and impugned order based on the illegal assessment order is itself illegal.

Briefly stated, the assessee is a resident individual. The case of the assessee was reopened by issuing notice under Section 148 of the Act. The proceedings were initiated on the basis of AIR information that the assessee has allegedly sold immovable property / land to her husband, the value of which at circle rate stands at Rs.44,25,000/- and the income arising from such transaction has escaped assessment . In the course of the re-assessment proceedings, the assessee submitted before the Assessing Officer that no consideration has been exchanged in the instant case between the transferor and transferee towards impugned transaction. The sale deed was executed merely to return the property by the Assessee to the assessee’s husband since the purchase consideration of such property were paid originally in Financial Year 1998-99 by the husband when the purchase took place. The property at that time, was however purchased by the husband in the name of the wife, i.e., assessee herein. In the course of hearing, the Assessing Officer called the assessee and also her husband and recorded a statement on oath in this regard. The assessee and her husband also filed an affidavit which essentially states that agricultural land was earlier purchased on 09.12.1999 at a purchase consideration of Rs.1,52,000/- in the name of assessee whereas the entire payment was made by husband namely, Shri Pramod Kumar Goel. The subsequent sale deed has been entered into with a view to restore the said property in the name of husband which actually belonged to the husband all along and the assessee committed a mistake in executing sale deed instead of gift deed. No consideration was paid by the husband to the assessee for such restoration of rights in property. The Assessing Officer after taking note of the facts and circumstances, framed the re-assessment order dated 17.08.2016 under Section 143(3) r.w. Section 147 of the Act. Significantly, the Assessing Officer in the re-assessment order further noted that where all the money has been invested by the husband of the assessee then by virtue of Section 64 of the Act, any income arising from the impugned agricultural land is required to be taxed in the hands of the husband in accordance with law. The Assessing Officer in the re-assessment order further noted that the fact was confronted to the assessee and the husband of the assessee, Shri Pramod Kumar Goel agreed for inclusion of agricultural income in his hand in terms of Section 64 of the Act. The Assessing Officer accepted the return income with such remarks.

Subsequent to the assessment so carried out, the ld. Pr.CIT perused the assessment records and observed that the re-assessment order is erroneous and prejudicial to the interest of the Revenue for the reason that Assessing Officer has failed to include Long Term Capital Gains (LTCG) arising on a sale of agricultural land by the assessee to her husband to the total income and wrongly accepted the plea of the assessee for non- taxability thereof. Show cause notice was issued, replies were considered and the Assessing Officer was directed to enhance the income assessed in the re-assessment order to the extent of Long Term Capital Gains on sale of impugned agricultural land situated at Modinagar.

Aggrieved by the revisional action, the assessee preferred appeal before the Tribunal challenging the revisional action.

We have heard the rival submissions and perused the revisional order and the re-assessment order. We have also perused the material referred to and relied upon by both the sides.

In the revisional order, the Pr.CIT has assailed the assessment order on the ground that LTCG arising on transfer of agriculture land by assessee to her husband is liable to taxation which has been erroneously not done by the Assessing Officer resulting in prejudice to the interest of revenue. In the course of hearing, it is seen from the record placed that the issue disputed by the Pr.CIT in the revisional proceedings was subject matter of intense examination by the Assessing Officer. In fact, in the re-assessment proceedings, the case of the assessee was reopened for inclusion of Long Term Capital Gains for its taxability. Detailed inquiries were carried out by the Assessing Officer as vindicated from the statements recorded by the Assessing Officer in this regard. The assessee and her husband both appeared before the Assessing Officer and clarified the factual matrix. The affidavit was also placed on record before the Assessing Officer. Thus, the Assessing Officer has made adequate inquiries and came to conclusion that the transfer of property / agricultural land in favour of husband by the assessee by execution of sale deed was intended to reinstate the name of husband as owner of the property, who was the owner from beginning and had paid entire consideration at the time of purchase. Consequently, the transfer does not warrant any taxability under the head ‘Capital Gains’. Thus, whether the re-assessment order can be regarded as erroneous insofar as prejudicial to the interest of the Revenue has to be tested on the touchstone of the plausibility of explanation given by the assessee before the Assessing Officer. Where the opinion formed by the Assessing Officer towards non taxability of any LTCG on purported sale is found plausible then the act of the Assessing Officer cannot be regarded as erroneous per se and consequently the jurisdiction of ld. Pr.CIT would be automatically ousted. In the reverse, if the opinion formed by the Assessing Officer is wholly incongruent with the scheme of the Act, the Pr.CIT shall be within its right to usurp jurisdiction under Section 263 of the Act.

As delineated on behalf of the assessee, it is an undisputed position that although the property was purchased in the name of the assessee-wife, the purchase consideration were paid by the husband of the assessee at the time of purchase of land in December, 1999. The sale deed dated 27.12.2008 was executed to handover the agricultural land back to husband for which no consideration whatsoever was received by the assessee. The only mistake committed was that instead of execution gift deed a sale deed was executed to restore the legal rights of husband. In essence, it is the case of the assessee that sale deed is nothing but gift deed intended to transfer the land as vouched by lack of consideration and in view of the attendent circumstances. This fact was brought on record by way of oral evidence as well as circumstantial evidence. No negative fact is available on record to dispute the assertions made on behalf of the assessee as well as her husband jointly. Having understood the nuances of the factual matrix, the Assessing Officer also invoked Section 64 of the Act for clubbing of income and simultaneously exonerated the assessee from the liability of Long Term Capital Gain on notional consideration in the absence of any real income accrued to the assessee. The Assessing Officer thus accepted the version of the assessee with application of mind. We do see plausibility in the position taken by the Assessing Officer on the basis of factual background after due application of mind. Under the circumstances, merely because the Pr.CIT thinks differently on the point on the issue would not entitle him in law to substitute his opinion by the view adopted by the Assessing Officer in discharge of his quasi judicial functions. We thus find merit in the plea of the assessee.

Consequently, we hold that in the absence of any error in the re- assessment order per se, the revisional jurisdiction assumed by the Pr. CIT under Section 263 is bad in law and consequently impugned revisional order dated 27.12.2018 for Assessment Year 2009-10 in question requires to be quashed.

In the result, the appeal of the assessee is allowed.