TMI Blog2021 (10) TMI 456X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thus while applying the principles laid down in the case of Sir Dorabji Tata Trust Vs DCIT(E) [ 2020 (12) TMI 1121 - ITAT MUMBAI] it is evident that in the present case, the A.O. had made all necessary enquiries and verifications as can be expected of a prudent, judicious and responsible A.O. in normal course of his assessment work. Even ld. PCIT has not specified as to what type of enquiry ought to have been made by the A.O. which would have resulted into income or disallowance or any other adverse action, therefore, in such circumstances, the order passed by the A.O. cannot be branded as erroneous and prejudicial to the interest of revenue, therefore, we set aside and quash the order passed u/s 263 of the Act. - Decided in favour of assessee. - ITA No. 26/JODH/2021 - - - Dated:- 7-10-2021 - Shri Sandeep Gosain, Judicial Member And Shri Vikram Singh Yadav, Accountant Member For the Assessee : Shri Manish Surana, CA For the Revenue : Smt. Sanchita Kumar, CIT-DR ORDER PER: SANDEEP GOSAIN, J.M. The present appeal has been filed by the assessee against the order of the ld. Pr.CIT-1, Jodhpur dated 19/03/2021 for A.Y. 2016-17 passed u/s 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n't be used for any other purpose other than the purpose for which it was converted by the authority. As the said land was converted solely for the purpose of agro processing, therefore, the activity of construction of roads and colony on the said land was not legally allowable. Hence, taking into consideration the facts discussed above, the assessee was liable to be taxed treating the transaction of purchase and sale of land as business income. The Assessing Officer without making proper inquiries and verifications, allowed the claim of short term capital gain on the said transactions. The AO is directed to examine and verify the purchase, improvement and sale of land under the light of business transaction/activity of the assessee and tax the income accordingly. The matter relating to Short Term Capital Gain on sale of Land was dwelt upon by the Ld AO in great detail. The detail of property purchased and sold viz Purchase Deed, sale deed Cost to improvement amounting to ₹ 70.04 Lacs under the ledger Land Filling, levelling, development account, conversion order were called upon and furnished the AO vetted the aforesaid documents critically and made whopp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h and failed to produce any documentary evidence of payment other than self made vouchers. Therefore, as per above discussion, the 58.3% (as per para 4.1. part of land sold) payment of ₹ 6,56,400 i.e. ₹ 3,82,680/- claimed against water tanker is disallowed and added to the total income of assessee in the head of capital gain under short term capital gain for the relevant year. It was directed by the PCIT that the sale of land be booked under the head Business and Profession rather than STCG. Such type of subjectivity which propagates one line of action and negates another is nothing but a change in opinion. The courts across the spectrum have unanimously held that the order of AO can be brandished as erroneous if it is unsustainable in the eyes of law. If there are two views plausible on the facts of the case and the AO takes one view which is in accordance of law. In that particular scenario the PCIT does not assume jurisdiction. Hence the order passed by the Ld. Pr. CIT is bad in law and is requires to be quashed. Issue/Point 2: In the return of income, the assessee has not disclosed the sale consideration of property mentioned as Sr. No. 1 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pass(3.56 hq). The cost of land sold which signifies the cost attributable to the land sold was debited by ₹ 7021255.00 and new account namely land at khara bypass 3.56 hq which underlies the cost of retained land was debited by ₹ 3955012.00. The action of crediting the land at khara bypass was necessitated by the apportionment of the cost of converted land into two parts namely one attributable to land sold and another one relating to land retained. Thus, the act of apportioning the cost of land by way of splitting the cost into two heads does not constitute sale, hence there is no question of showing the same as sale in the return of income. It is therefore requested that the present order of the Ld. Pr. CIT may please be quashed as void ab initio and oblige. Issue/Point 3: While completing the assessment, the source of acquisition of the mentioned immovable assets has not been examined by the AO. The AO is directed to examine and verify the source of investment in purchase of these properties. During the course of Proceedings Fixed assets Chart as well as Interest account were furnished together with the Financial Statements of Year under rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut creditworthiness of none of them was verified by the AO by invoking the provisions of Section 131 or Section 133(6) of the Income Tax Act, 1961. During the course of proceedings all the duly signed account statement, bank accounts, ITR and interest account were duly furnished and properly verified by Ld AO. There has not been any single amount of cash being deposited into the accounts of cash creditors. The money has come from the banking channel and the payers were regular assessee of Income Tax. Thus the onus of identity and genuineness of cash creditors stand discharged. Since there is no factum of cash being deposited immediately prior to the issue of cheque in favour of assessee, the source of money is also established. There is no obligation on the part of AO to inquire into the source of source of cash credit. AO having examined all the details had not drawn any adverse inference against any loan creditors and did not follow a view 'unsustainable in law' and assessment order was not the result of non-application of mind or any inadequate enquiry, accordingly, invocation of jurisdiction under section 263 was untenable. The courts across the spectrum have una ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom Kunjvarji ji warehousing and Logistics Pvt. Ltd. The aforesaid payment of ₹ 2 crore was received as a sale consideration of land to the company. This sale of this land is a subject matter of STCG the detailed discussion at Point No 1. The Form 26AS is already available on assessment record. From the perusal of it one may find that Tax has been Deducted u/s 194IA which is related to sale of Immovable Property. The brandishing of this apparent consideration from the sale of property is beyond comprehension. The assessee has received the interest of ₹ 2,43,110.00 from Dhanpat chayal which stands reflected in the interest account under the head Yuva life style. It may be noted the Shri Dhanpat Chayal is proprietor of M/s Yuva Life Style. The TDS in case of proprietorship concern is always deducted in the name of proprietor which was Shri Dhanpat Chayal in the instant case. The Tax has been deducted wrongly under the wrong section. It should have been under section 194A rather than 1941(b) which relates to Rental Income. The rate of TDS is same i.e. 10% under both the Sections. Thus there is no escapement of income from the clutches of revenue. It is therefore s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled elaborate reply in pursuance of the query raised by the A.O. on 20.12.2018 thereby giving away the various details inter-alia the land chart. In this regard, our attention was drawn to the page no. 2 of the assessment order where the AO has computed the amount of STCG as well as prepared the quantitative tally and undertook ratio analysis. From the record, we noticed that the AO did extensive verification of the land which was a subject matter of development. He bifurcated the development expenditure into cash and cheque as well. The relevant extract of assessment order appearing at Page no. 4 is being reproduced as under: Further, the assessee has claimed ₹ 70,04,902/- against cost of improvement. The whole land is improved (levelling, land filing and development) simultaneously because the part which is sold has lower level of sand that the part which is left with assessee. Therefore the cost of improvement of 70 lacs is for whole land of 10.84 hectare. The assessee is failed to explain how he bifurcate the expenses of improvement between the land sold and the land left with him. The ledgers produced by him and the amounts paid by cheques clarifies it that the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting ₹ 1,16,12,878 and ₹ 1,09,76,267) and this fact has not been verified by the Assessing Officer while completing the assessment. Therefore, AO was directed to examine and verify the investment in purchase and tax treatment on sale of these properties. However, as per the ld. AR, the allegation is totally unfounded since no sale has taken place of the properties in that particular state. During the course of assessment proceedings the factum of agriculture land at Khara Bypass which was converted was thoroughly examined and verified. The various land accounts and land chart were furnished. From the point no 3 of the order it is obvious that 9.88 Hectare of land was converted. The same figures contained at point no 4. The accounts of the assessee are maintained in such a way that the account get changed upon the change in nature/use of the property in question. The agriculture land at khara bypass was purchase for ₹ 10903818.00 and stamp duty of ₹ 709060.00 was paid thereon. The total cost thereof worked out to ₹ 11612878.00. When a part of aforesaid land measuring 9.88 hectare was converted for industrial use and the balance land of 0.83 hectare was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,43,320 3. Agri land at Khara Bypass (.83 Hq) 8,99,971 4. Land at Ginnani (998.75 Sq. Ft) 57,592 5. Land at JNV (4-0-35 2100 Sq. Ft) 2,10,723 6. Land at Khara 43,430 7. Land at Khara (3.56 Hq) 48,64,930 8. Land at Meghasar (1/3 portion of 31.66 Hq) 25,998 9. Land at Nokha 2,22,202 10. Land Building at Ratansagar Well 85,038 11. Land in JNV Colony (6A-38, 1/2 portion) 2,30,535 12. Plot at Ganganagar 1 (1800 Sq. Ft) 5,777 13. Piot at Ganganagar 2 (1800 Sq. Ft) 5,777 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the regular channel of the assessee and the total value of such investment was reflected in the financial statement which is available on records. The assets of the assessee had its source in capital and liability. Each and every entry falling in that category is fully verifiable. Tubewell at khara bypass was constructed during the year for ₹ 334425.00. The investment in tubewell stand reflected in the financial statement of the assessee available on records. Thus, in this way when all the facts supported with evidences were placed on record before the A.O. and A.O. being satisfied, passed order, therefore, the same cannot be interfered by the PCIT. 9. Now while dealing with point/issue No. 4, we observed that during the year under consideration, the assessee has obtained unsecured loans amounting to ₹ 1,95,34,000 from various persons, but creditworthiness of none of them was verified by the AO by invoking the provisions of Section 131 or Section 133(6) of the Act. However, in this regard, the ld. AR submitted that during the course of proceedings all the duly signed account statement, bank accounts, ITR and interest account were duly furnished and properly verif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that when confronted with the reasons set out in the SCN, the assessee had led before the Ld. Pr. CIT sufficient documentary evidence which proved that the SCN had proceeded on assumption of incorrect facts which were not borne out from the assessment records. It was also established before the Ld. Pr. CIT that before completion of assessment the AO had indeed made enquiries from all the loan creditors u/s 133(6) and only after objective consideration of the evidences furnished, order u/s 143(3) of the Act was passed. On receipt of these objections, the Ld. Pr. CIT himself did not make any effort to prove any factual or legal infirmity in the documents or explanations furnished nor he was able to prove that any of the documents or evidences were false so as to establish that the AO's order was erroneous as well as prejudicial to the Revenue's interests because the view taken by him was unsustainable in law. On the contrary, the Ld. Pr. CIT merely set aside the assessment order directing AO to pass the order afresh in accordance with law which in our opinion was nothing but giving the AO second innings without establishing that the AO's order was erroneous as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as thoroughly examined all details including source of interest payment, therefore, PCIT has no jurisdiction to invoke the provisions of Section 263 of the Act. 11. Now we deal with point/issue No. 6 raised by the ld. PCIT, in this regard, the ld. PCIT observed that as per details available in Form 26AS, the assessee has received payment u/s 194 of ₹ 2,00,00,000/- as dividend from M/s. Kunjvarji Warehousing and Logistics Pvt. Ltd. The amount has not been declared by the assessee in his return of income under this head. In this regard, the ld. AR has drawn our attention to the records and submitted that the assessee has not received any payment of dividend of ₹ 2,00,00,000.00 from Kunjvarji ji warehousing and Logistics Pvt. Ltd. The aforesaid payment of ₹ 2 crore was received as a sale consideration of land to the company. This sale of this land is a subject matter of STCG the detailed discussion at Point No 1. The Form 26AS is already available on assessment record. From the perusal of it one may find that Tax has been Deducted u/s 194IA which is related to sale of Immovable Property. The brandishing of this apparent consideration from the sale of property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the exercise of jurisdiction by the Commissioner suo moto under it, is that the order of ITO/AO is erroneous in so far as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied or twin condition and in case if one of them is absent then recourse cannot be had to Section 263 of the Act and thus in this way the provisions 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 then the Section will be attracted. Even the Coordinate bench of ITAT in the decision of Sir Dorabji Tata Trust Vs DCIT(E) 188 ITD 38 had discussed and explained the nature and scope of provisions of explanation 2(a) of Section 263 of the Act and held as under: 19. The question that we also need to address is as to what is the nature of scope of the provisions of Explanation 2(a) to Section 263 to the effect that an order is deemed to be erroneous and prejudicial to the interests of the revenue when Commissioner is of the view that the order is passed without making inquiries or verification which should have been made . 20. Undoubtedly, the expression used in Explanation 2 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, when circumstances so justify or warrant, nor can a public authority exercise the powers, to the detriment of anyone, unless circumstances so justify or warrant. What essentially follows is that unless the Assessing Officer does not conduct, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant- that an Assessing Officer is expected to be, Commissioner cannot legitimately form the view that the order is passed without making inquiries or verification which should have been made . The true test for finding out whether Explanation 2(a) has been rightly invoked or not is, therefore, not simply existence of the view, as professed by the Commissioner, about the lack of necessary inquiries and verifications, but an objective finding that the Assessing Officer has not conducted, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant that the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an auditor (read Assessing Officer in the present context) is not bound to be a detective, or, as was said, to approach his work with suspicion or with a foregone conclusion that there is something wrong. He is a watch-dog, but not a bloodhound. . Of course, an Assessing Officer cannot remain passive on the facts which, in his fair opinion, need to be probed further, but then an Assessing Officer, unless he has specific reasons to do so after a look at the details, is not required to prove to the hilt everything coming to his notice in the course of the assessment proceedings. When the facts as emerging out of the scrutiny are apparently in order, and no further inquiry is warranted in his bona fide opinion, he need not conduct further inquiries just because it is lawful to make further inquiries in the matter. A degree of reasonable faith in the assessee and not doubting everything coming to the Assessing Officer's notice in the assessment proceedings cannot be said to be lacking bona fide, and as long as the path adopted by the Assessing Officer is taken bona fide and he has adopted a course permissible in law, he cannot be faulted- which is a sine qua non for invoking the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have claimed out or not. It does not authorise or give unfettered powers to the Ld. Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. 22. Having said that, we may also add that while in a situation in which the necessary inquiries are not conducted or necessary verifications are not done, Commissioner may indeed have the powers to invoke his powers under section 263 but that it does not necessarily follow that in all such cases the matters can be remitted back to the assessment stage for such inquiries and verifications. There can be three mutually exclusive situations with regard to exercise of powers under section 263, read with Explanation 2(a) thereto, with respect to lack of proper inquiries and verifications. The first situation could be this. Even if necessary inquiries and verifications are not made, the Commissioner can, based on the material before him, in certain cases straight away come to a conclusion that an addition to income, or disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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