TMI Blog2014 (10) TMI 656X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be a general order - while setting aside the assessment, CIT has directed the A.O. to compute the assessee's income by treating the profit on sale of land as income from business instead of short term or long term gains - CIT cannot direct the AO to make the assessment in a particular way – thus, the order of the CIT is to be modified to the extent of deleting the direction of CIT to treat the profits as business income and thus modify the direction to AO to decide the matter of taxation on sale of land as per law – Decided against assessee. - ITA No. 1157 /Ahd/2013, ITA No. 1158/Ahd/2013, ITA No. 1160/Ahd/2013 - - - Dated:- 17-10-2014 - Shri G. C. Gupta And Shri Anil Chaturvedi,JJ. For the Petitioner : Shri Vimalendu Verma, CIT D.R. For the Respondent : Shri S. N. Soparkar, A.R. ORDER PER BENCH These appeals are filed by assessee against the order u/s. 263 of the Act of CIT dated 25.03.2013 for the assessment year 2008-09. 2. Before us at the outset the ld. A.R. submitted that though the appeals are of 3 different assessees but all are family members and the facts and circumstances of all the 3 cases are similar except for the amounts and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings u/s. 263. The objections of the assessee were not found acceptable to Ld. CIT. He thereafter vide order dated 25.03.2013 held that the order passed by the A.O. was on the wrong assumption of facts, incorrect application of law and without making inquiry and thus the order of the AO passed u/s 143(3) dated 22/12/2010 was erroneous and prejudicial to the interest of Revenue and therefore the provisions of Section 263 becomes applicable and accordingly set aside the assessment order dated 22/12/2010 passed by the AO and directed the A.O. to decide the issue afresh by treating the profit on sale of land as income from business, examine the genuineness of cash advance received by the assessee and the genuineness of the expenses incurred on improvement and development of land. 5. Aggrieved by the order of the CIT, the assessee is now in appeal before us and has raised the following grounds. 1. Ld. CIT erred in law and on facts invoking provisions of section 263 of the Act holding assessment framed in scrutiny proceedings u/s 143 (3) as erroneous and prejudicial to the interest of revenue to the extent of failure of AO to examine taxability of sale proceeds of the land as b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order under scrutiny assessment. 6. Before us, ld. A.R. submitted that though assessee has raised various grounds but the only effective ground is challenging the order of CIT passed u/s. 263 of the Act. 7. Before us the Ld. A.R. apart from reiterating the submissions made before CIT submitted that in the present case the assessee was holding all the land for more than 36 months, the land was not held as stock in trade and therefore the assessee had rightly considered the profit on the sale of land as capital gains . He also submitted that in the present case the prerequisite conditions specified u/s 263 are not satisfied. He submitted that the during the course of assessment proceedings AO had raised the query, the query was replied by the assessee and on being satisfied by the reply of the assessee, A.O. had passed the assessment order u/s. 143(3). He further submitted that it is not necessary for the A.O. to note in the assessment order each of the queries raised by him and the replies thereto which were received by him from the Assessee. He also pointed to page no.3 being the letter of the AO dated 30.10.2010 asking the assessee to file the copy of purchase and sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se power of revision u/s 263, namely (i) the order is erroneous (ii) by virtue of being erroneous prejudice has been caused to the interests of the Revenue. 11. The Hon ble Apex Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) has observed as under:- A bare reading of Section 263 of the I.T. Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the CIT suo motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the Revenue. The CIT has to be satisfied of twin conditions, namely (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudiced to the interests of the Revenue. If one of them is absent- if the order of the ITO is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue- recourse cannot be lead to Section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the A.O., it is only when an order is erroneous, that the Section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income of the same. In reply to the query of A.O., assessee vide letter dated 7.12.2010 submitted the details, the relevant portion being as under: 1. We submit a chart showing full particulars of the various plots of land sold by the assessee in the format desired by your goodself. We state that all the plots owned by the assessee and sold by him are owned jointly with the co-owners as mentioned the chart of the capital gain. The snare of all the co-owners is equal i. e. 1/6. We like to bring to your kind notice that the out of the total area of block No. 4 i.e. out of 32,375 sq. mtrs., an area of 13,199 is acquired by the government at a price of ₹ 11,36,053. As the total cost of the plot is adjusted against the sales consideration, the total amount of ₹ 1.89,342 (i. e. the proportionate share of the assessee being 1/6th of the total price) is treated as long term capital gain. 2. We submit herewith the sale and purchase documents of land situated at Motera survey No. 2/2 on which the assessee has a long term capital gain of ₹ 3,50,421. 3. We furnish herewith the copy of the purchase agreement of the land situated at Hadmatia survey No. 4 and land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls called for by your goodself by your earlier letter, which could not be furnished alongwith our letter dated 2nd November, 2010. 12. On pursuing the query raised by the A.O. and its reply by the assessee dated 7.12.2010 reproduced hereinabove it is seen, that no specific query was raised by the AO about the amounts received on sale of land as income from business. It is further seen that even after the receipt of reply dtd 7.12.2010 about the details about the sale of various pieces of land, no further query was raised by the A.O. about the treatment of tax of the receipts on sale of land and the A.O. had accepted the submissions of the assessee. In the present case we find that A.O. has not inquired about the details of the land development expenses, amount of advance received by the assessee, details of sales made to parties. 13. Before us, one of the arguments put forth by the ld. A.R. was that it is not necessary for the A.O. to note in the assessment order each of the queries raised by him and the replies thereto which were received from the Assessee. It would be relevant to reproduce the entire assessment order passed u/s 143(3) on 22.12.2010 which reads as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct H ble High Court after referring to the decisions of Supreme Court in the case of Rampyari Devi Sarogi vs CIT (1968) 67 ITR 84 (SC) and Tara Devi Aggarwal vs CIT (1973) 88 ITR 323 (SC) has further noted that the commissioner can regard the order erroneous on the ground that in the circumstances of the case, the ITO should have made further inquiries before accepting the statements made by the assessee in his return. 14. In the case of K.A. Ramaswamy Chettiar Anr. Vs. CIT (1996) 220 ITR 657 (Mad) the H ble High court after relying on the decisions in the case of Gee Vee Enterprises vs. Addl. CIT (1975) 99 ITR 375 (Del), Smt. Tara Devi Aggarwal vs. CIT (1973) 88 ITR 323 (SC) and Addl. CIT vs. Mukur Corporation (1978) 111 ITR 312 (Guj) has held that when the ITO is expected to make an enquiry of a particular item of income and he does not make an enquiry as expected, that would be a ground for the CIT to interfere with the order passed by the ITO since such an order passed by the ITO is erroneous and prejudicial to the interests of Revenue. 15. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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