ITA No. 5701/Del/2014
Asstt.Year: 2009-10
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `E' NEW DELHI
BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER
AND
SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER
I.T.A.No.5701/Del/2014
Asstt.Year: 2009-10
Maya Gupta, vs Commissioner of Income Tax,
52/79, Ramjas Road, Central-II, New Delhi.
Karol Bagh,
New Delhi.
(PAN: AAMPG7019F)
(Appellant) (Respondent)
Appellant by: Dr. Rakesh Gupta, Shri Ashwani Taneja, Advocate
Respondent by : Shri Gunjan Prashad, CIT DR
Date of Hearing: 29.06.2015
Date of pronouncement: 08/07/2015
ORDER
PER CHANDRA MOHAN GARG, JUDICIAL MEMBER
This appeal has been filed by the assessee against the order of CIT(A),
Central-II, New Delhi dated 06.03.2014 for AY 2009-10 passed u/s 263 of the
Income Tax Act, 1961 (for short the Act) in respect of assessment order dated
28.12.2011 passed u/s 143(3) r/w section 153 of the Act. The grounds raised by
the assessee read as under:-
"1. That on facts and in law the Commissioner of
Income Tax, Central-II, New Delhi {hereinafter referred to as
the "CIT"} erred in assuming jurisdiction u/s 263 of the Act.
1
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
2. That on facts and in law the CIT erred in
holding/observing that the original order of assessment dated
281h December 2011 is erroneous /prejudicial to the interest
of revenue on following counts:
a. Allowing deduction u/s 24(b) of the Income Tax Act.
b. Not considering for taxation alleged income of Rs 1
cr being alleged unaccounted payment for purchase of
property no. 56/7 DB Gupta Road, Karol Bagh, New Delhi.
c. Not making a reference to valuation cell for verifying
the sale consideration of other properties sold by the
appellant during the year under consideration.
c. Failure to conduct necessary / proper enquiry and
verification on issues mentioned above.
3. That on facts and in law the CIT erred in assuming
jurisdiction to pass revisional order u/s 263 on issues, which
were subject matter of appeal.
4. That on facts and in law the CIT erred in selling aside
the order of assessment dated 28th December 2011 for a de
novo adjudication on issues mentioned above."
2. Briefly stated the facts giving rise to this appeal are that a search and
seizure operation was carried out in Mahesh Mehta group of cases on
30.6.2009. During the course of search at the residential premises at BA-17A,
DDA Flats, Phase-I, Ashok Vihar, Delhi, certain documents belonging to the
assessee were found and seized. On the basis of said documents so seized and
after recording satisfaction, proceedings u/s 153C of the Act were initiated and
the notice u/s 153C of the Act was issued on 21.6.2011. In response to the
same, the assessee had filed a letter stating that the assessee has already filed
her return which may be treated as filed u/s 153C of the Act. The assessment
u/s 143(3) r/w section 153C of the Act was completed on 28.12.2011 by the
2
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
AO, Central Circle-3, New Delhi at the returned income of Rs.1,48,26,520
which was declared in the original return filed on 25.3.2010.
3. Subsequently, on examination of assessment records, the CIT observed
that the assessment order passed by the AO dated 28.12.2011 (supra) is
erroneous as well as prejudicial to the interest of revenue to the extent that
assessment was completed without proper examination, inquiry and verification
on three issues viz. claim of interest expenses amounting to Rs.6,36,111/-, issue
of transaction of Rs.1 crore with regard to property purchased by the assessee
jointly with her husband from M/s Honest Estates Pvt. Ltd. and issue of capital
gain out of which Rs.1 crore was diverted from capital gain to income from
other sources.
4. The assessee was asked to show cause as to why in the light of facts
contained in the show cause notice dated 18.2.2014, assessment order dated
28.12.2011 may not be considered as erroneous and prejudicial to the interest of
revenue as per provisions of section 263 of the Act.
5. In response to the said notice, the assessee filed written submissions
through the AR vide letter dated 3.3.2014. After considering the submissions
and reply of the assessee, the CIT held that the AO has failed to conduct proper
inquiry and verification on the issues contained in the show cause notice. The
CIT finally held that the assessment order passed u/s 143(3) r/w section 153C of
the Act dated 28.12.2011 is erroneous and prejudicial to the interest of revenue
3
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
and the CIT invoking provisions of section 263 of the Act set aside assessment
order with the direction to the AO to frame the assessment order after proper
examination, inquiry and verification on all three issues. Being aggrieved by
the above revision order of CIT u/s 263 of the Act, the assessee is before this
Tribunal in this appeal with the grounds as reproduced hereinabove.
6. We have heard arguments of both the sides and carefully perused relevant
material placed on record, inter alia original assessment order dated 28.12.2011
(supra), impugned order of the CIT passed u/s 263 of the Act, assessee's paper
book spread over 205 pages and judgements and citations relied by both the
parties.
7. Ld. counsel of the assessee submitted that the only issue in this appeal is
against the assumption of jurisdiction u/s 263 of the Act by the ld. CIT, which
according to the appellant assessee was not in accordance with law and valid.
Ld. counsel of the assessee has also filed written submissions which are being
reproduced below for the sake of brevity and clarity in our observations and
conclusion:-
"SMT. MAYA GUPTA
The only issue in this appeal is against the assumption of
jurisdiction u/s 263 by Ld. CIT, which according to the
appellant, was not in accordance with law.
Ld. CIT assumed jurisdiction u/s 263 on the following
grounds on which AO during the course of assessment
proceeding has applied his mind and has taken a conscious
decision which can not be said to be erroneous merely because
4
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
Ld. CIT holds otherwise in view of umpteen number of judicial
decisions including the decisions which say that absence of
enquiry and not inadequate enquiry can be the ground of
holding an order as erroneous.
Proceeding under section 263
PB 188-190 is the copy of notice u/s 263 giving the show cause
in respect of three issues.
PB 191-194 is the reply furnished by the assessee in response to
notice u/s 263 submitting inter alia that there was no error nor
any prejudice.
Scope of section 263 - Revising authority feeling inquiry
inadequate -Revising authority must make enquiry and show
that assessment order was erroneous-Revising authority has no
power to remand and direct Assessing Officer to conduct
enquiry-income-tax Act, 1961, s. 263 -DIT vs. Jyoti Foundation
357 ITR 388 (Delhi)
Lack of proper enquiry-in cases where there is
inadequate enquiry by the AO and not lack of enquiry, CIT must
give and record a finding that the order / enquiry made is
erroneous before passing an order under s. 263-Matter cannot
be remitted for a fresh decision to the AO to conduct further
enquiries without a finding that the order is erroneous-ITO vs.
DG Housing Projects Ltd. 74 DTR 153 (Del.)
Lack of proper enquiry-Assessee having given complete
details of the provisions of warranty in response to the query
raised by the AO during the course of assessment proceedings
and regarding claim of deduction under s. 35DDA AO accepted
the assessee's claim after examining the same, order under s.
263 passed by the CIT cannot be sustained -CIT vs. Hero Auto
Ltd. 74 DTR 164 (Del.)
Power of commissioner -Assessment after enquiry-No
error in order-Order cannot be revised on ground enquiry
should have been more detailed-income-tax Act, 1961, s. 263-
CIT vs. Hindustan Marketing And Advertising Co. Ltd.
3411TR 180 (Delhi)
5
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
Revision-Commissioner conceding Assessing Officer
making inquiries, eliciting replies before treating expenses as
revenue expenditure-Not a case of lack of inquiry- Department
accepting accounting practice followed by assessee for past
years and future-Revision questioning accounting practice not
justified-CIT vs. Sunbeam Auto Ltd. 332 ITR 167 (Delhi)
243 ITR 83(SC)
Following pleadings and evidences would support the
case of the appellant:-
1) Deduction on account of interest was allowed u/s 24
against the 'income from house property' though requisite
certificate in terms of section 24(b) was not filed by the
assessee.
PB 6-10 is the copy of computation of income,
acknowledgment of return for A.Y. 2009-10, in which the
assessee has shown deduction u/s 24 from the income from
house property'.
PB 11-14 is the copy of questionnaire dated 30.06.2011
issued by Ld. A.O. during the course of assessment proceeding
to show that Ld A.O. asked question relating to details of all
properties and investment made, utilization of money, loans
taken.
PB 15-16 is the copy of assessee's submissions dated
15.11.2011 filed to Ld. A.O. during the course of assessment
submitting the copy of bank accounts, statements of assets and
liabilities, confirmation of loan.
PB 152-153 is further submissions dated 02.12.2011 field
to td. A.O. during the course of assessment proceeding
submitting the copy of bank accounts, and further submitting
about the loan from HDFC bank and about the payment of
interest on housing loan.
PB 156-157 is further submission of the assessee dated
05.12.2011 filed during the course of assessment proceeding
again submitting about the claim of the interest of housing loan.
PB 158 is the copy of HDFC bank statement showing the
amount of interest.
6
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
2) On the issue of Rs. 2 Crores as alleged unaccounted
payment
PB 183-187 is the copy of assessment order passed u/s
143(3) I 153C with prior approval of Additional CIT, and a
plain reading of this order would clearly show that the issue of
Rs. 2 Crore was clearly discussed and mind was applied and a
conscious decision was taken and capital gain income was
brought to tax and so much so nature of part of the capital gain
was changed from capital gain to income from other sources.
PB 1-5 is the copy of the statement recorded of the
husband of the appellant during the course of survey in which
the husband of the appellant was clearly asked about the details
of various properties and consideration received and also about
the purchase of Property No. 56/7, DB Gupta Road, Karol Bag,
New Delhi and sale of Property No. 783/161, DB Gupta Road,
Karol Bag, New Delhi in which the appellant's husband clearly
stated that amount of Rs. 2 Crore to be paid by the assessee's
husband was never paid but were retained by Mr. Mehta to be
set off against the payment of Rs. 2 Crore, which he was to
make.
It is important to submit that this statement was taken on
oath and was considered by Ld. A.O. vide passing the impugned
assessment order.
PB 6-10 is the copy of computation of income,
acknowledgment of return for A. Y. 2009-10, in which the
assessee has shown calculation of capital gain on the sale of
Property No. 7821161, DB Gupta Road, New Delhi and other
properties
PB 11-14 is the copy of questionnaire dated 30.06.2011
issued by Ld. A.O. during the course of assessment proceeding
to show that Ld A.O. asked question relating to search of Mr.
Mehta, details of all bank accounts of the assessee, details of all
properties and investment made, utilization of money, and is
specifically about the purchase of Property No. 56/7, D.B.
Gupta Road, Karol Bag, New Delhi involving the alleged
unaccounted payment of Rs. 2 Crore
PB 15-16 is the copy of assessee's submissions dated
15.11.2011 filed to Ld. A.O. during the course of assessment
submitting the copy of bank accounts, statements of assets and
7
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
liabilities, note on the property purchased i.e. 56/7, DB Gupta
Road, fact of sale of three properties and furnishing sale deed
PB 17-73, 87-126 are the copies of purchase/sale deed of
both the properties 56/7, 783/161 DB Gupta Road, Karol Bag
New Delhi
PB 152-153 is further submissions dated 02.12.2011 field
to Ld. A.O. during the course of assessment proceeding
submitting the copy of bank accounts, affidavit of the assessee
in respect of additional income in respect of sale of Property
No. 783/161, DB Gupta Road, Karol Bag new Delhi, & further
submitting about the loan from HDFC bank and about the
payment of interest on housing loan.
PB 154-155 is the copy of affidavit of the assessee filed
during the course of assessment proceeding before Ld. A.O.,
inter alia, submitting that undisclosed investment of Rs. 2 Crore
made by the assessee in Purchase of 56/7, DB Gupta Road,
Karol Bag, New Delhi was retained by Mr. Mehta against the
unaccounted sale consideration of Rs. 2 Crore to be received in
respect of sale of Property No. 7831161, DB Gupta Road, Karol
Bag, New Delhi
PB 156-157 is further submission of the assessee dated
05.12.2011 filed during the course of assessment proceeding
again submitting about the adjustment of Rs. 2 Crore made by
Mr. Mehta.
PB 181-182 is the copy of order sheet entries showing the
proceedings before Ld. A.O. and specific query regarding the
adjustment of Rs. 2 Crore
3) Sale of other properties
PB 183-187 is the copy of assessment order passed u/s
143(3) / 153C with prior approval of Additional CIT, and a
plain reading of this order would clearly show that the issue of
Rs. 2 Crore was clearly discussed and mind by applied and a
decision was taken and capital gain income was brought to tax
and so much so nature of part of the capital gain was changed
from capital gain to income from other sources.
PB 6-10 is the copy of computation of income,
acknowledgment of return for A.Y. 2009-10, in which the
assessee has shown calculation of capital gain on the sale of
8
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
Property No. 7821161, DB Gupta Road, New Delhi and other
properties
PB 11-14 is the copy of questionnaire dated 30.06.2011
issued by Ld. A.O. during the course of assessment proceeding
to show that Ld A.O. asked question relating to all bank
accounts of the assessee, details of all properties and
investment made, utilization of money.
PB 15-16 is the copy of assessee's submissions dated
15.11.2011 filed to Ld. A.O. during the course of assessment
submitting the copy of bank accounts, statements of assets and
liabilities, note on the property purchased i.e. 56/7, DB Gupta
Road, confirmation of loan fact of sale of three properties and
furnishing sale deeds.
PB 1-5 is the copy of the statement recorded of the
husband of the appellant during the course of survey in which
the husband of the appellant was clearly asked about the details
of various properties and consideration received.
It is important to submit that this statement was taken on
oath and was considered by Ld. A.O. vide passing the impugned
assessment order.
PB 74-86 and PB 127-151 are the copies of sale deeds in
respect of two other properties sold by the assessee filed to Ld.
A.O. during the assessment proceedings.
PB 159, 160, 161 are the copies of summons dated
25.11.2011 sent by Ld. A.O. to the buyers of Property No.
7831160 and 783/162.
PB 162-163, 164-180 is the copy of reply dated
01.12.2011 filed by Mrs. Anita Chabra to Ld. A.O. in response
to the summon confirming the purchase of Property No.
7831160, DB Gupta Road, New Delhi and giving various
details / source and filing the copies of bank statements, her
PPF account, PNB salary account, copy of income tax return
filed by her etc.
PB 181-182 is the copy of order sheet entries showing the
proceedings before Ld. A.O. and specific query regarding the
adjustment of Rs. 2 Crore
9
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
There is no such mandate in law that a property be
referred for valuation for determining the sale consideration
and following are the decisions which say that capital gains is
to be calculated with reference to the actual sale consideration,
and not on the basis of valuation put by the valuation officer.
- Valuation of property-Reference of Departmental
Valuation Officer for valuation of investment -Additional solely
on basis of valuation report-Not permissible-Income tax Act,
1961-CIT vs. Lahsa Construction P. Ltd. 3571TR 671 (Delhi)
- S. 69B-Unexplained investment-Investment in property-
No evidence that extra consideration received-Addition to
income based solely on report of District Valuation Officer -Not
valid- CIT vs. Sadhna Gupta 352 ITR 595 (Delhi)
4) The impugned assessment order was passed with prior
approval of an higher authority i.e. Additional Commissioner in
terms of section 153D and therefore in view of the following
judicial decisions, jurisdiction could not be assumed u/s 263
Goyal Iron & Steel Works (India) vs. Commissioner of
Income Tax* (2002) 76 TTJ(Agra) 578
Mehta Cut Piece Cloth House vs. Income Tax Officer
(1985) 23 TT J (CHD) 211
Income Tax Officer vs. Arora Alloys Ltd. (2011) 12 ITR
(Trib) 263 (Chd)
8. Ld. counsel of the assessee during argument before us reiterated and
elaborated the above written submissions and submitted that the issue of claim
of deduction on account of interest was allowed u/s 24 of the Act against the
"income from house property" and was disputed by the CIT by observing that
the same is not allowable as per third proviso to section 24B of the Act as the
assessee had not furnished required certificate from the party or parties to whom
this amount of interest was paid. Ld. counsel took us through paper book page
no. 6 to 16 and 152 to 158 of the assessee and submitted that as per computation
10
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
of income and acknowledgement of return, it is clear that the assessee has shown
deduction u/s 24 of the Act from the income from house property. Ld. counsel
further submitted that in response to questionnaire dated 30.6.2011 issued by the
AO, the assessee submitted detailed reply on 15.11.2011 along with copies of
bank account, statement of assets and liabilities and confirmation of loan. Ld.
counsel has also drawn our attention towards paper book page no. 152 to 158
and submitted that in further submissions dated 2.12.2011, the assessee filed
copies of bank accounts about the loan from HDFC Bank and payment of
interest on housing loan and also copy of HDFC Bank showing the amount of
interest paid against housing loan by the assessee. Ld. counsel submitted that on
the issue of interest claimed, the assessee properly explained and established the
claim as per provisions of the Act which was wrongly disputed by the CIT and
explanation in this regard was not properly considered by the CIT.
9. Ld. counsel of the assessee, on the issue of unaccounted payment of Rs. 2
crore has drawn our attention towards paper book page no. 1 to 73, 87 to 126,
152 to 157 and 181-182 and submitted that the impugned assessment order
passed u/s 143(3) r/w section 153C of the Act was passed with prior approval of
ACIT. On plain reading of this order, it is clear that the issue of Rs. 2 crore
alleged unaccounted payment was clearly discussed with due application of
mind and a conscious decision was taken while bringing capital gain income to
tax and the nature of part of capital gain was changed from capital gain to
11
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
income from other sources on justified basis. Ld. counsel further pointed out in
the statement recorded during the course of survey, the husband of the assessee
was asked about the details of various properties and consideration received and
also about the purchase or property wherein the assessee's husband clearly
stated that the amount of Rs.2 crore to be paid by the assessee's husband was
never paid but was retained by Mr. Mehta to be set off against the payment of
Rs.2 crore which he was to make. Ld. counsel vehemently contended that this
statement of assessee's husband was recorded on oath and was properly
considered by the AO while passing the impugned assessment order. Ld.
counsel submitted that during the course of assessment proceedings, the assessee
submitted calculation of capital gain on sale of property No. 782/161, DB Gupta
Road, New Delhi, supported by details of all bank accounts of the assessee,
details of all properties and investment made, utilisation of money and specially
about the purchase of property no. 56/7, DB Gupta Road, Karol Bagh, New
Delhi involving the alleged unaccounted payment of Rs. 2 crore. Ld. counsel
vehemently contended that in the written submission dated 2.12.2011, the
assessee filed copies of bank account, affidavit of the assessee in respect of
additional income from sale of property no. 783/161 DB Gupta Road, Karol
Bagh, New Delhi and also the details of loan from HDFC Bank and payment of
interest on housing loan. Ld. counsel finally submitted that the issue of
transaction of Rs.2 crore was properly considered and adjudicated by the AO as
12
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
per facts and circumstances of the case after due application of mind and proper
appreciation of the submission and evidence of the assessee in this regard.
10. In respect of last issue of sale consideration of other properties, ld.
counsel of the assessee has further drawn our attention towards relevant pages of
paper book of the assessee and submitted that in the impugned assessment order
which was passed by the AO with prior approval of the ACIT, it is clear that the
issue of Rs.2 crore was properly discussed and mind was applied, therefore, a
conscious decision was taken and capital gain income was brought to tax and so
much so, the nature of part of capital gain was changed from capital gain to
income from other sources. Ld. counsel of the assessee has further pointed out
that in reply to questionnaire dated 30.6.2011, the assessee submitted copies of
all bank accounts, details of all properties and investment made and utilization
of money with detailed submissions dated 15.11.2011 filed to the AO. Ld.
counsel also submitted that the statement of assessee's husband recorded during
the course of survey was also considered while adjudicating this issue. The ld.
counsel also pointed out that in reply to summons dated 25.11.2011, Mrs. Anita
Chabra filed reply on 1.12.2011 confirming the purchase of property no.
783/160, CB Gupta Road, New Delhi along with various relevant details, source
of funds supported by copies of bank statement, PPF account, PNB salary
account and copy of income tax return filed by her. Therefore, the impugned
assessment order was passed after due application of mind on this issue and the
13
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
CIT was not justified in assuming jurisdiction u/s 263 of the Act for revising the
assessment order and directing the AO to re-frame the assessment after
verification and examination of the return of the assessee.
11. Ld. DR supporting the issuance of notice and impugned order passed u/s
263 of the Act submitted that as per contents of the notice dated 18.2.2014
issued to the assessee u/s 263 of the Act, it is amply clear that the order of the
AO was not only erroneous but also prejudicial to the interest of revenue
because the AO failed to conduct proper inquiry in respect to three issues viz.
deduction of Rs.6,36,111 which was not allowable as per third proviso to section
24(b) of the Act, the second issue of Rs. 1 crore being unaccounted cash
payment on purchase of property no.56/7, Deshbandhu Gutpa Road, Karol
Bagh, New Delhi was not considered for taxation and third and last issue
wherein the AO completed the assessment proceedings without making any
inquiries/investigation on the issue of capital gain/income accrued to the
assessee along with her husband. Ld. DR elaborately took us through the
contents of the notice u/s 263 of the Act (supra) and submitted that in view of
ratio of the decision of Hon'ble Jurisdictional High Court of Delhi in the case of
Duggal & Co. vs CIT (1996) 220 ITR 456 (Del), the CIT(A) was competent to
exercise his power u/s 263 of the Act where the ITO/AO while allowing
deduction for interest and on other issues omitted to inquire into the matter in a
proper way.
14
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
12. Ld. DR has also drawn our attention towards operative para 5.1 to 7 of the
impugned order and submitted that from the discussion therein, it is clear that
the AO has failed to conduct proper inquiry and verification on all three issues
raised in the notice u/s 263 of the Act. Ld. DR vehemently contended that in
various judicial pronouncements, it has been held that where inquiry or
verification is warranted but not done, it would certainly cause prejudice to the
interest of revenue and the Commissioner shall be justified in invoking
provisions of section 263 of the Act and in remanding the matter back to the AO
for making such necessary inquiry. Ld. DR parted with the argument with a
final submission that the AO would allow the assessee to explain his stand on all
three issues during reassessment proceedings in pursuance to order u/s 263 of
the Act and therefore, no prejudice would be caused to the assessee and hence
action of the AO invoking provisions of section 263 of the Act may kindly be
upheld.
13. Ld. counsel of the assessee placing reliance on the ratio of the decision of
Hon'ble Jurisdictional High Court of Delhi in the case of ITO vs D.G.
Housing Project Ltd. (2012) 343 ITR 329 (Del) submitted that the
Commissioner cannot remand the matter for a fresh decision to the AO to
conduct further inquiry without a finding that the order of the AO is erroneous
as well as prejudicial to the interest of revenue and such finding of the CIT that
the order is erroneous is a consideration precedent for exercise of jurisdiction u/s
15
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
263 of the Act. Ld. counsel pointed out that the compliance of third proviso to
section 24 (b) of the Act is not mandatory and there is no prescribed proforma in
this proviso for the certificate as required under the said proviso, therefore, copy
of statement of account with HDFC Bank, Pahar Ganj account no. 3224059 in
the joint name of assessee and her husband Shri Uday Kumar Vaish was itself
sufficient to establish and support the claim of the assessee. Ld. counsel has
also drawn our attention towards letter of HDFC Bank dated 15.3.2011 and
submitted that the assessee paid full and final amount of loan along with interest
which was also certified by the concerned HDFC Bank Branch and when the
AO has not raised any doubt about the genuineness of the payment of interest
and repayment schedule/statement of accounts with the concerned HDFC Bank
branch, then it cannot be said that the AO granted deduction to the assessee
without any inquiry and against the provisions of the Act.
14. Ld. counsel on the second issue of over and above payment towards
purchase of property situated at 56/7, Desh Bandhu Gupta Road and sale of
property situated at 783/161, Deshbandhu Gupta Road Karol Bagh submitted
that the AO made detailed inquiry and after considering the reply and other
relevant documents submitted by the assessee during assessment proceedings in
the light of statement of assesasee's husband Shri Uday Kumar Vaish recorded
on 18.8.2009 u/s 133 of the Act and held that the assessee has shown a capital
gain at Rs.1,40,00,057 and offered additional income of Rs.1 crore as part of
16
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
income under capital gain. Ld. counsel has further drawn our attention towards
reply of the assessee dated 3.3.2014 submitted before the CIT(A) replying to the
notice dated 263 of the Act which is available at pages 191-194 of the assessee's
paper book and submitted that the assessee has not either diverted its head of
income which she actually earned under the capital gain nor withdrawn her
stand which the spouse of the assessee gave in his statement before the survey
team. Ld. counsel vehemently contended that the AO in fact has not given relief
of special rate of income tax on long term capital gain and taxed the same
amount at maximum rate of tax and shifted Rs. 1 crore to income from other
sources instead of income from capital gain which attracts higher rate of tax and
this action of the AO cannot be held as erroneous and prejudicial to the interest
of revenue. Ld. counsel vehemently contended that how a particular additional
income declared by the assessee during survey cannot be treated and taxed
twice, once under the head of capital gains and secondly under the head of
income from other sources. Ld. counsel also pointed out that the assessee has
already preferred an appeal against the diversion of additional income of Rs.1
crore from capital gains to income from other sources which is pending before
the ITAT Delhi Benches.
15. On the third issue of allegation of the AO that the AO completed
assessment without making any inquiry/investigation regarding other property
transactions, the ld. counsel of the assessee has drawn our attention towards
17
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
computation of income which was filed along with return available at page 10 of
assessee's paper book and submitted that the assessee calculated the short term
capital gain on the sale consideration of property at 783/162, Karol Bagh, Delhi
for half share. Ld. counsel further submitted that the assessee also submitted
statement of short term capital gain accrued to the asessee from sale of property
at 16C, Motia Khan, Pahar Ganj, another property at 783/161, Deshbandhu
Gupta Road, New Delhi and third property at 8750, Motia Khan, New Delhi and
offered the amount of Rs.1,40,00,057 for taxation under the head of capital gain.
Ld. counsel further took us through para no. 3 of the notice u/s 263 of the Act
(supra) and submitted that any addition to aforesaid four properties, CIT picked
up property no. 783/160, Deshbandhu Gupta Road, Karol Bagh and 49D, MIG
Flat, Motia Khan which were not sold by the assessee and these two properties
were in the name of assessee's husband Shri Uday Kumar Vaish and there was
no need of any inquiry in regard to these properties during the assessment
proceedings of the assessee. Therefore, the third issue raised by the CIT was
also not justified and order of the AO cannot be held as erroneous and
prejudicial to the interest of revenue on all three counts. Ld. counsel of the
assessee lastly pointed out that the AO was very cautious in framing assessment
order as he considered unaccounted amount of Rs.1 crore which was accrued to
the assessee from sale of property at 783/161, Deshbandhu Gupta Road, Karol
Bagh and also considered unaccounted consideration of Rs. 1 crore which was
paid by the assessee as unaccounted consideration towards purchase of property
18
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
at 56/7, Deshbandhu Gupta Road, Karol Bagh. Ld. counsel also pointed out that
the CIT was very casual in mentioning facts in the notice issued to the assessee
u/s 263 of the Act as the CIT wrongly mentioned that the assessee has purchased
the property at 783/161, Deshbandhu Gupta Road, Karol Bagh which shows
non-application of mind and wrong appreciation of facts by the CIT prior to
invoking provisions of section 263 of the Act and issuance of notice under this
provision. Ld. counsel reiterated its reply to the notice u/s 263 of the Act and
parted with the argument with a last submission that the assessee offered an
amount of Rs.1,40,00,057 under the head of capital gain as the source of
investment but the AO segregated Rs.1 crore from this amount and taxed the
same under the head of income from other sources which attracts higher tax rate,
then this action of the assessee cannot be said to be erroneous and prejudicial to
the interest of revenue. But on the other hand, this action of the AO imposed
higher tax liability on the assessee which brings more revenue to the department.
16. On careful consideration of above submissions and vigilant and careful
perusal of relevant material placed before us, at the outset, we find it appropriate
to deal with legal contention of the assessee that the impugned assessment order
was passed by the AO with prior approval of higher authority i.e. Addl.
Commissioner in terms of section 153D of the Act and therefore in view of
various judicial pronouncements and judgments, jurisdiction u/s 263 of the Act
cannot be validly assumed and invoked by the CIT. To support this legal
19
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
proposition, ld. counsel of the assessee has placed reliance on the orders of the
Tribunal in the case of Goyal Iron & Steel Works (India) vs. Commissioner
of Income Tax(supra, Mehta Cut Piece Cloth House vs. Income Tax Officer
(supra), Income Tax Officer vs. Arora Alloys Ltd. (supra).
17. Replying to the above, ld. DR has submitted that the ratio of these
decisions is not applicable to the facts and circumstances of the present case and
ACIT who gave approval u/s 153D of the Act for passing assessment order u/s
143(3) r/w section 153C of the Act is not equivalent to the position of CIT in the
hierarchy of the department, therefore, the impugned assessment order was very
well within the valid jurisdiction of the CIT for invoking provisions of section
263 of the Act.
18. On careful consideration of orders of the Tribunal as related by the ld.
counsel of the assessee and provisions of section 153D of the Act and hierarchy
of the income tax department, we are of the considered view that admittedly, the
impugned assessment order which was demolished by the CIT by invoking
provisions of section 263 of the Act was passed with prior approval of ACIT,
Central Range-2, New Delhi vide F.No.153A-03-Mahesh Mehta/11-12/607
dated 28.12.11. The CIT in any terms cannot be equated with ACIT because
CIT holds higher position in the hierarchy of the department. In this situation,
benefit of the ratio of the orders of the Tribunal as relied by the ld. counsel of
20
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
the assessee is not available and hence legal contention of the assessee is hereby
jettisoned.
19. Coming to the issue as alleged by the CIT in the notice issued to the
assessee u/s 263 of the Act (supra), we note that as per third proviso to section
24(b) of the Act, no deduction shall be made under the second proviso unless the
assessee furnishes certificate from the person to whom interest is payable on the
capital borrowed, specifying the amount of interest payable by the assessee for
the purpose of such acquisition or construction of property was conversion of
the whole or in part of the capital borrowed which remains to be repaid as a new
loan. Meaning thereby that for making claim u/s 24(b) of the Act, a certificate
specifying the amount of interest payable by the assessee has to be submitted
before the AO. From careful reading of section 24 and all three proviso attached
to this provisions, we note that there is no mentioning of any proforma on which
required certificate has to be given. In absence of any prescribed proforma, the
amount of interest payable may be substantiated by way of furnishing a normal
certificate, statement of loan account and other supportive evidence or details
pertinent to payment of interest which was claimed as deduction u/s 24(b) of the
Act. In the present case, the assessee furnished all required detail before the AO
during assessment proceedings along with reply dated 2.12.2011 and 5.12.2011.
From a reply dated 5.12.2011 we note that in para 1, the assessee has mentioned
details of claim of interest and has submitted all necessary evidence in respect of
21
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
interest paid along with this reply in the form of repayment schedule/copy of the
bank statement with HDFC Bank. The AO during the assessment proceedings
has made inquiry in this regard and after proper and reasonable verification and
evaluation of explanation and supportive evidence, submitted by the assessee on
this issue, allowed deduction to the assessee. The CIT has objected the
allowance of deduction on the allegation of non-furnishing of required
certificate as per third proviso to section 24(b) of the Act but there is no
conclusion of the CIT that the amount claimed by the assessee was either wrong
or it was a bogus claim. During the proceeding u/s 263 of the Act, the assessee
also furnished a letter confirming the full and final repayment of loan along with
interest but it was properly considered by the CIT.
20. Under above noted facts and circumstances, we are of the view that under
third proviso to section 24(b) of the Act, the assessee is required to submit a
certificate for making claim of interest under this provision and there is no
prescribed form of certificate. During the assessment proceedings on the
specific query of the AO, the assessee furnished detailed explanation supported
by repayment schedule, copy of the bank statement to substantiate its claim and
the amount of interest has not been disputed either by the AO or by the CIT. In
this situation, merely non-compliance of directory provisions of the Act cannot
make assessment order as erroneous and prejudicial to the interest of revenue,
especially when the claim of the assessee regarding interest u/s 24(b) of the Act
22
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
is accepted as genuine and no incorrectness or infirmity has been brought out by
the ld. CIT or any other revenue authorities therein. If for a moment it is
accepted that order is erroneous on account of required certificate but at the
same time, the same cannot be held as prejudicial to the interest of the revenue
as the claim of interest paid by the assessee has not been alleged as bogus or not
correct or not genuine by the ld. CIT.
21. Under above noted facts and circumstances, we are inclined to note that
the view taken by the AO was a reasonable and plausible view which cannot be
said as unsustainable or not in accordance with law and other relevant provisions
of the Act on the issue of allowability of deduction or interest paid by the
assessee.
22. While considering the second issue of Rs.1 crore being unaccounted cash payment on
purchase of property no. 56/7, Deshbandhu Gupta Road, Karol Bagh, New Delhi, from
relevant part of the notice u/s 263 of the Act on this issue, we note that the CIT has raised and
agitated this issue with following facts and observations:-
"2.2.1 In para 5.3 page no. 2 of the assessment order the A 0
stated that "During the course of survey Sh. Uday Kumar Vaish admitted to
purchase the property jointly with his wife Smt. Maya Gupta from M/s
Honest Estates Pvt. Ltd. against Rs.4.51 crore consisting of 1st Floor, IInd
Floor and IIIrd Floor with its terrace/roof rights. The registry was done of
Rs. 2.51 crore whereas the amount paid to Sh. Mahesh Mehta on behalf of
M/s Honest Estate Pvt. Ltd. was Rs. 4. 51 crore." The same fact is repealed
in a way or the other in the assessment order in para 5.4, page no. 2, in
para 5.7 page no. 4. in para 5.8, page no. 4 etc. This is a clear case of
concealed unaccounted transaction of Rs.1 crore (the other 1 crore shared
by the assessee's husband), the source of which was not enquired &
examined.
2.2.2 The assessee has furnished a statement of short term Capital Gain/ Long Term
Capital Gain and accordingly arrived at a total Capital Gain of Rs. 1,40,00,057/-
and offered unaccounted transaction of Rs.1 crore as part of income under
23
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
Capital Gain. The AO neither rejected the assessee's capital gain shown at
Rs. 1,40,00,057/- nor he made a recomputation of the capital gain showing
its afresh how he arrived 01 Rs. 40,00,057 - only but he simply took out 1
crore from the Capital Gain and placed it under the head "Income from
Other Sources ".
2.2.3 It is to be noted that property situated at 56/7, D.B.
Gupta was sold on 17.07. 2008 to Shri Mahesh Mehta and
another property situated at 783/161. DB Road was purchased
from Honest Estate (P) Ltd. on 11.07.2008. The date of sale of
Property is subsequent to the date of purchase of property. This
fact shows that unaccounted cash payment of Rs. 2 crore on
purchase of property can not be set off against unaccounted
receipt on sale of property. Both transactions are with different
legal entities and purchase precedes sales.
2.2.4 While there is a clear Capital Gain statement
furnished by the assessee showing it or Rs. 1,40,00,057/-, the
AO's action in diverting 1 crore from the capital gain to income
from other sources is not justified at all.
2.2.5 Simply diverting capital gain income to "Income
from other Sources" does not imply taxing the unaccounted /
concealed income of Rs.1 crore represented by cash investment
in property purchased. The Capital Gain declared by the
assessee with proper statement in no way can be reduced or
overlapped considering the facts of this case.
2.2.6 Therefore. it is apparent that the assessment order
passed by the A.O. is erroneous as well as prejudicial to the
interest of the revenue as Rs. 1 crore being unaccounted cash
payment on purchase of property no. 56/7, DB Gupta Rodd,
Karol Bagh, New Delhi was not considered for taxation. "
23. From the copy of the assessment order passed u/s 143(3)/153C of the Act,
we note that the issue of unaccounted receipt from Shri Mahesh Mehta and issue
of payment of unaccounted money to M/s Honest Estate (P) Ltd. has been dealt
from para no. 5 to 5.8 elaborately. From the notices of the AO dated 30.6.11
along with letter (assessee's paper book page 11 to 14), we find that during the
24
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
course of proceedings, the AO showcaused the assessee asking question relating
to search of Mr. Mahesh Mehta, details of all bank accounts of the assessee,
properties and investment made, utilization of money and there is a specific
query about the provisions of property no. 56/7, DB Gupta Road, Karol Bagh,
involving the alleged unaccounted payment of Rs.2 crore out of which Rs.1
crore pertains to the assessee. We further observe from the copy of the
assessee's submissions dated 15.11.11filed before the AO replying to the
questionnaire and notice dated 30.6.11, the assessee submitted copies of bank
account, statement of assets and liabilities and a detailed note on the properties
purchased by the assessee and property sold during the period under
consideration. In assessee's paper book page 17 to 73, we observe that the
assessee jointly purchased property no. 56/7, DB Gupta Road, with her spouse
from M/s Honest Estates Pvt. Ltd. wherein three separate sale deeds have been
executed in favour of the assessee, first sale deed was registered on 11.7.2008
and remaining two sale deeds were registered on 17.7.2008. From sale deeds
pertaining to property bearing no. 783/160, 161 & 162, DB Gupta Road, New
Delhi available from pages 74 to 171 of the asessee's paper book, we note that
the assessee and her husband jointly sold one property to Mrs. Anita Chhabra
and her son Sitaksh Chhabra, another property to Mrs. Gurcharan Kaur and two
parts of this property have been sold to Mr. Mahesh Mehta by getting registered
sale deed in his favour on the same date i.e. 17.7.2008.
25
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
24. If we further analyse this issue, then we observe that as per statement of
assessee's husband Shri Uday Kumar Vaish recorded u/s 133 of the Act on
18.8.2009 at the time of survey of the assessee, we note that the husband of the
assessee replying to question no. 6 at page no. 4 of the statement fairly admitted
that a sum of Rs. 2 crore in cash on account of part of sale consideration of
property no. 783/161 was kept by Mr. Mahesh Mehta as purchase consideration
of newly purchased building at 56/7, DB Gupta Road, New Delhi purchased
from him i.e. Mr. Mahesh Mehta himself, he was under the
impression that no capital gain was to be invoked on this amount. However, in
the subsequent part of the answer, assessee's husband submitted that if this is the
capital gain against his old building as a part of sale consideration, then he is
ready to pay the capital gain tax on this amount subject to no penalty
proceedings just to buy peace. From the statement of short term and along term
capital gain filed along with the return of income available at page 10 of the
assessee's paper book, we note that the assessee offered short term capital gain
of Rs.4,18,200 on sale consideration of property at 783/162, Karol Bagh for half
share. In the second part of this statement, we see that the assessee has offered
long term capital gain accrued to her from sale consideration of three properties
viz. 16C, Motia Khan, Paharganj, property no. 8750, DB Gupta Road, New
Delhi amounting to Rs.1,35,81,857 and in the calculation of taxable income,
income from capital gain has been shown as Rs.1,40,00,057. At this point, it is
relevant to consider the contention of the assessee which were placed before the
26
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
CIT in reply dated 3.3.2014 to notice u/s 263 of the Act wherein at page 5
middle para, it has been mentioned that the purchase from different persons and
sale to different persons is apparent from the sale deed but the group and dealing
person is the same i.e. Mr. Mahesh Mehta for the transaction and sale of
property at 783/162 and purchase of property at 56/7, DB Gupta Road through
Mr. Mahesh Mehta who is the authorised director of M/s Honest Estate (P) Ltd.
and he entered into property transaction with the assessee for purchase of
property in individual capacity and for sale of property in the representative
capacity as director of the said company. This fact and contention of the
assessee has not been demolished by the CIT and without bringing out any
allegation that the purchase of property and sale of property was with different
persons and entities, it cannot be held that the assessee had entered into property
transaction with different persons/entities. Further, as we have already noted
that the sale of property no. 783/161 was made to Shri Mahesh Mehta and
purchase of property no. 56/7, DB Gupta Road was also made from M/s Honest
Estates (P) Ltd. in which Mr. Mahesh Mehta is a director representative of the
transaction, then in totality of the facts and circumstances, especially when the
sale deeds of both the transactions are registered and executed on the same date
i.e. 17.7.2011, then the half share of sale consideration received by the assessee
amounting to Rs. 1 crore attracts capital gain which has been offered by the
assessee in the statement of long term capital gain as discussed above. We
further observe that while the assessee has shown unaccounted consideration in
27
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
the statement of capital gain filed along with the return of income, then it further
explains the source of unaccounted payment of consideration of purchase of
property bearing no. 56/7, DG Gupta Road, hence, no addition pertaining to
undisclosed investment could have been made. However, as a vigilant tax
collecting authority, the AO adopted a conservative approach and deducted Rs.
1 crore from capital gain and taxed the same under the head of income from
other sources which obviously attracts higher tax rate, then this action of the AO
is more favourable to the revenue which cannot be held as erroneous and
prejudicial to the interest of revenue.
25. At this juncture, it would be appropriate to consider the ratio of the
decision of Jurisdictional High Court of Delhi in the case of CIT vs DG Housing
(supra) wherein it was held that the Commissioner cannot remit the matter for a
fresh decision to the AO to conduct further inquiries without a finding that the
order is erroneous as a condition precedent for exercise of jurisdiction us/ 263 of
the Act.
26. From operative part of the order of the CIT at para 6 page 9, we note that
the CIT has held that the assessment on the issues raised in the show cause
notice was made without proper examination, inquiry and verification, therefore,
revisional jurisdiction u/s 263 of the Act is warranted in a case where
assessment has been made without inquiry or verification. In this para, the CIT
contradicts himself in the first sentence. He mentions that the assessment was
28
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
framed without proper examination, inquiry and verification whereas in the
second sentence, he writes that the assessment has been made without inquiry or
verification which vitiate the impugned order.
27. Coming to the third and last issue raised by the CIT in the notice and
impugned order u/s 263 of the Act (supra), is related to sale of several other
properties during the relevant previous year. From para 3 of the notice u/s 263
of the Act issued to the assessee, we note that the CIT has picked up six
properties to substantiate this issue against the assessee. Ld. counsel of the
assessee submitted that property listed at Sl. No. 2 to 6 are related to assessee's
husband Shri Uday Kumar Vaish and the assessee has nothing to do with the
capital gain and consideration arising therefrom. Ld. counsel further pointed out
that as far as property at sl. No.1, 3, 4 & 5 are concerned, assessee was holding
these properties jointly with her husband and the assessee filed statement of
short term capital gain in regard to all these four properties which was properly
verified, examined and accepted by the AO. Ld. counsel vehemently contended
that the CIT did not peruse the statements and calculation of income filed by the
assessee along with her husband and the CIT has ignored statement of capital
gain filed by the assessee at the time of framing impugned notice u/s 263 of the
Act as well as impugned order.
28. Replying to the above, ld. DR submitted that mere query and reply of the
assessee are not sufficient to meet the requirement of proper verification and
29
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
examination of the details filed by the assessee along with return of income and
merely because some details have been filed along with return of income and
some queries were raised by the AO which do not amount to an adequate and
proper examination of the issue. Ld. DR pointed out that there was an
understatement of consideration pertaining to property at 783/161, DB Gupta
Road sold to Mr. Mahesh Mehta and the AO did not consider the issue of
understatement of consideration and capital gain in regard to property no.
783/160 and 783/162, therefore, the action of the CIT was quite justified and
correct. Replying to the above, ld. counsel of the assessee pointed out that there
was no incriminating material against the assessee regarding understatement of
sale consideration and capital gain except statement of her husband Shri Uday
Kumar Vaish which was recorded during the survey u/s 133 of the Act and the
AO very well examined all the relevant papers and documents pertaining to
income of capital gain accruing to the assessee during the relevant period,
therefore, the view taken by the AO was plausible and in accordance with law
because despite deep inquiry during the assessment proceedings to the sale of
other properties, there was no incriminating material or allegation against the
assessee which could show the understatement of consideration and capital gain
by the assessee on sale of other properties.
29. On careful consideration of above submissions, we are of the view that on
careful perusal of the statement of capital gain undisputedly submitted by the
30
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
assessee along with return of income, we note that the assessee has declared
capital gain on properties placed at sl. No. 1, 3, 4 & 5 in para 3 page 2 of the
notice u/s 263 of the Act, properties at sl. No. 2 & 6 are not in the name of
assessee, therefore, we are of the considered opinion that there was no
requirement of any further examination and verification with regard to these
properties. From para no. 3 of the impugned notice, we note that after placing
table of properties, the CIT has simply mentioned that the AO has completed the
assessment without making any inquiry or investigation on this issue, therefore,
it is apparent that the assessment passed by the AO is erroneous and prejudicial
to the interest of revenue. In view of documents placed by the assessee before
the authorities below, we note that the CIT made a list of properties sold by the
assessee during the period under consideration and also included two properties
which were undisputedly related to her husband Shri Uday Kumar Vaish,
therefore, there was no need of any further verification and examination in
regard to sale consideration and capital gain accrued therefrom. As far as capital
gain arising from other four properties listed at Sl. No. 1, 3, 4 & 5 is concerned,
we note that the assessee declared sale consideration and capital gain in the
statement filed along with her return of income. The AO properly considered
understatement of consideration and capital gain accrued to the assessee after
properly considering the statement of assessee's husband Shri Uday Kumar
Vaish recorded u/s 133 of the Act. We are unable to see any other incriminating
material or evidence which could establish the allegation of understatement of
31
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
sale consideration and capital gain on other properties. Per contra, from the
assessment order, we note that the AO took a favourable view to the revenue by
placing Rs. 1 crore under the head of income from other sources instead of
income from capital gains as declared by the assessee. Without making any
deliberation on the merit of this action of the AO, we are of the view that
decision taken by the AO cannot be held as unsustainable or not in accordance
with law.
30. From operative part of the impugned order, we note that the CIT has
remitted all three issues to the file of AO by holding that the AO has failed to
conduct proper examination and verification on three issues. The CIT further
held that in view of various judicial pronouncements, it has been held that where
the inquiry or verification is warranted but not done, it would certainly cause
prejudice to the revenue and the Commissioner shall be justified in remanding
the matter back to the AO for making such inquiry. At this juncture, it would be
appropriate to consider the ratio laid down by the Jurisdictional High Court of
Delhi in the case of ITO vs DG Housing Projects Ltd. (supra), wherein it was
held that the Commissioner cannot remit the matter for fresh decision to AO to
conduct further inquiry without a finding that the order of the AO is erroneous
because such finding that the order is erroneous is condition precedent u/s 263
of the Act.
32
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
31. The relevant operative part of this order in para 10 and 11 and relevant
para 16 to 18 read as follows:-
"10. Revenue does not have any right to appeal to the
first appellate authority against an order passed by the
Assessing Officer. Section 263 has been enacted to empower the
CIT to exercise power of revision and revise any order passed
by the Assessing Officer, if two cumulative conditions are
satisfied. Firstly, the order sought to be revised should be
erroneous and secondly, it should be prejudicial to the interest
of the Revenue. The expression ,,prejudicial to the interest of
the Revenue is of wide import and is not confined to merely
loss of tax. The term ,,erroneous means a wrong/incorrect
decision deviating from law. This expression postulates an error
which makes an order unsustainable in law.
11. The Assessing Officer is both an investigator and an
adjudicator. If the Assessing Officer as an adjudicator decides a
question or aspect and makes a wrong assessment which is
unsustainable in law, it can be corrected by the Commissioner
in exercise of revisionary power. As an investigator, it is
incumbent upon the Assessing Officer to investigate the facts
required to be examined and verified to compute the taxable
income. If the Assessing Officer fails to conduct the said
investigation, he commits an error and the word ,,erroneous
includes failure to make the enquiry. In such cases, the order
becomes erroneous because enquiry or verification has not
been made and not because a wrong order has been passed on
merits.
-------------
16. Thus, in cases of wrong opinion or finding on merits, the
CIT has to come to the conclusion and himself decide that the
order is erroneous, by conducting necessary enquiry, if
required and necessary, before the order under Section 263 is
33
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
passed. In such cases, the order of the Assessing Officer will be
erroneous because the order passed is not sustainable in law
and the said finding must be recorded. CIT cannot remand the
matter to the Assessing Officer to decide whether the findings
recorded are erroneous. In cases where there is inadequate
enquiry but not lack of enquiry, again the CIT must give and
record a finding that the order/inquiry made is erroneous. This
can happen if an enquiry and verification is conducted by the
CIT and he is able to establish and show the error or mistake
made by the Assessing Officer, making the order unsustainable
in Law. In some cases possibly though rarely, the CIT can also
show and establish that the facts on record or inferences drawn
from facts on record per se justified and mandated further
enquiry or investigation but the Assessing Officer had
erroneously not undertaken the same. However, the said finding
must be clear, unambiguous and not debatable. The matter
cannot be remitted for a fresh decision to the Assessing Officer
to conduct further enquiries without a finding that the order is
erroneous. Finding that the order is erroneous is a condition
orrequirement which must be satisfied for exercise of
jurisdiction under Section 263 of the Act. In such matters, to
remand the matter/issue to the Assessing Officer would imply
and mean the CIT has not examined and decided whether or not
the order is erroneous but has directed the Assessing Officer to
decide the aspect/question.
17. This distinction must be kept in mind by the CIT while
exercising jurisdiction under Section 263 of the Act and in the
absence of the finding that the order is erroneous and
prejudicial to the interest of Revenue, exercise of jurisdiction
under the said section is not sustainable. In most cases of
alleged "inadequate investigation", it will be difficult to hold
that the order of the Assessing Officer, who had conducted
enquiries and had acted as an investigator, is erroneous,
without CIT conducting verification/inquiry. The order of the
Assessing Officer may be or may not be wrong. CIT cannot
direct reconsideration on this ground but only when the order is
erroneous. An order of remit cannot be passed by the CIT to ask
34
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
the Assessing Officer to decide whether the order was
erroneous. This is not permissible. An order is not erroneous,
unless the CIT hold and records reasons why it is erroneous. An
order will not become erroneous because on remit, the
Assessing Officer may decide that the order is erroneous.
Therefore CIT must after recording reasons hold that the order
is erroneous. The jurisdictional precondition stipulated is that
the CIT must come to the conclusion that the order is erroneous
and is unsustainable in law. We may notice that the material
which the CIT can rely includes not only the record as it stands
at the time when the order in question was passed by the
Assessing Officer but also the record as it stands at the time of
examination by the CIT [see CIT vs. Shree Manjunathesware
Packing Products, 231 ITR 53 (SC)]. Nothing bars/prohibits the
CIT from collecting and relying upon new/additional
material/evidence to show and state that the order of the
Assessing Officer is erroneous.
18. It is in this context that the Supreme Court in Malabar
Industrial Co. Ltd. vs. Commissioner of Income Tax, (2000) 243
ITR 83 (SC), had observed that the phrase ,,prejudicial to the
interest of Revenue has to be read in conjunction with an
erroneous order passed by the Assessing Officer. Every loss of
Revenue as a consequence of an order of the Assessing Officer
cannot be treated as prejudicial to the interest of Revenue.
Thus, when the Assessing Officer had adopted one of the
courses permissible and available to him, and this has resulted
in loss to Revenue; or two views were possible and the
Assessing Officer has taken one view with which the CIT may
not agree; the said orders 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 such
matters, the CIT must give a finding that the view taken by the
Assessing Officer is unsustainable in law and, therefore, the
order is erroneous. He must also show that prejudice is caused
to the interest of the Revenue."
35
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
32. In view of above, as per ratio laid down by Hon'ble Jurisdictional High
Court, it is amply clear that in the cases where there is inadequate inquiry but
not lack of inquiry, again the CIT must give and record a finding that the
order/inquiry made is erroneous. This can happen if inquiry and verification is
conducted by the CIT and he is able to establish and show the error and mistake
made by the AO, making the order unsustainable in law. Their lordships further
made it clear that in some cases possibly though rarely, the CIT can also show
and establish that the facts on record or inferences drawn from facts on record
per se justified and mandated further enquiry or investigation but the Assessing
Officer had erroneously not undertaken the same. In this situation, the said
finding must be clear, unambiguous and not debatable. The matter cannot be
remitted for a fresh decision to the Assessing Officer to conduct further inquiry
without a finding that the order is erroneous. In this judgement, it was further
held that the distinction must be kept in mind by the CIT while exercising
judgment under Section 263 of the Act and in absence of the finding that the
order is erroneous and prejudicial to the interest of revenue, the exercise of
jurisdiction under said section is not sustainable. The assessee has also held
that the finding that the order is erroneous is the condition or requirement which
must be satisfied for exercise of jurisdiction u/s 263 of the Act. In such matters,
to remand the matter/issue to the Assessing Officer would imply and mean that
the CIT has not examined and decided whether or not the order is erroneous but
has directed the Assessing Officer to decide the aspect/question. In this
36
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
judgment, their lordships also guided us by saying that in the most of the cases
of alleged inadequate investigation, it would be difficult to hold that the order of
the AO, who had conducted inquiries and had acted as an investigator is
erroneous without CIT conducting verification/inquiry. It was also laid down
that the CIT can direct reconsideration of assessment on this ground but only
when the order is erroneous and an order of remit cannot be passed by the CIT
to ask the AO to decide whether the order was erroneous and such order is not
permissible under the provisions of section 263 of the Act. Finally, the bottom-
line of this judgment is that the jurisdictional pre-condition for invoking section
263 of the Act is that the CIT must come to the conclusion that the order is
erroneous and is unsustainable in law.
33. Turning to the facts of the present case, we have already discussed
elaborately hereinabove that the AO raised queries on all three issues and also
considered explanation, evidence and other relevant material placed before him
before framing impugned assessment order. The view taken by the AO on all
three issues agitated and alleged by the CIT in the notice u/s 263 of the Act
cannot be held as unsustainable and not in accordance with law. Per contra,
from careful and logical analysis of the action of the AO, we observe that in
regard to understatement of sale consideration received by the assessee and
understatement of purchase consideration paid by the assessee, undisputedly
both transactions were undertaken by the assessee and her husband jointly with
Mr. Mahesh Mehta and his other group entities on the same date i.e. 17th July,
2008, hence, the share of Rs.1 crore paid by the assessee towards unaccounted
purchase price of property no. 56/7, DB Gupta Road, the source of said
investment is self speaking and explained when the revenue authorities have
37
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
noted that the assessee had received unaccounted consideration of Rs.1 crore on
sale of property to Mr. Mahesh Mehta on the very same date. In this situation,
the addition on account of unexplained investment could not be made and
income of capital gain accrued to the assessee by way of unaccounted
consideration received by her. The tax liability on capital gain attracts which
was placed by the assessee along with her return of income available at page 10
of the paper book. The AO after consideration of capital gain statement
accepted the amount of Rs. 1 crore as unaccounted consideration received by
the assessee on sale of property and paid by the assessee on purchase of
property on the very same date and the AO instead of taxing the capital gain
taxed Rs.1 crore under the head of income from other sources which is a more
favourable view for the revenue. In this situation, view taken by the AO in
framing assessment order on all three issues cannot be held as unsustainable and
not in accordance with law. In this situation, while the CIT himself is not sure
about the issue of erroneousness of impugned assessment order, which is vivid
from the contents of the notice issued to the assessee u/s 263 of the Act and in
totality of the facts and allegations mentioned in the notice u/s 263 of the Act
and in the impugned order passed u/s 263 of the Act, we note that the CIT
simply alleged conclusion of the AO and held that the AO has failed to conduct
proper inquiry and verification on the issues cited above and without holding
any specific erroneousness and without any finding that the views taken by the
AO on all three are unsustainable and not in accordance with law. The CIT
cannot remit the matter for reassessment to AO. Finally, respectfully following
the ratio laid down by jurisdictional High Court of Delhi in the case of DG
Housing (supra), we are of the view that the conclusion of the AO on all three
alleged issues was supported by reasonable and plausible query, verification and
examination of relevant material which is reasonable and the same cannot be
held as unsustainable and not in accordance with law. In this situation,
invoking of provision of section 263 of the Act by issuance of notice and
38
ITA No. 5701/Del/2014
Asstt.Year: 2009-10
passing impugned order, directing the AO to revisit the issue and to make
further inquiry cannot be held as valid and in this situation, action of the CIT
issuing notice and passing impugned order cannot be held as sustainable and
valid and the same deserves to be quashed. We order accordingly.
34. Ground no. 1 to 4 of the assessee are allowed and notice issued by the
CIT and impugned order passed u/s 263 of the Act are quashed.
35. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 08/07/2015.
Sd/- Sd/-
(J.S. REDDY) (CHANDRAMOHAN GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
DT. 8th JULY 2015
`GS'
Copy forwarded to:-
1. Appellant
2. Respondent
3. C.I.T.(A)
4. C.I.T.
5. DR
By Order
Asstt.Registrar
39
|
