2021 (5) TMI 1001 - ITAT DELHI

Revision u/s 263 by CIT - Approval of the Addl. CIT had been received u/s 153D - Whether assessment order under section 153B(1)(b) read with Section 143(3) which is approved by the JCIT under section 153D could be revised by the Learned PCIT under section 263 ? - HELD THAT:- As search was conducted in the case of assessee on 21.07.2016. The A.O. proceeded to pass the assessment order under section 153B(1)(b) of the I.T. Act read with Section 143(3) of the I.T. Act, 1961. It is also not in dispute that the A.O. at the assessment stage as well as after completion of the assessment discussed the matter in issue with the JCIT under section 153D of the I.T. Act and after getting approval of the JCIT under section 153D of the I.T. Act passed the impugned assessment order Dated 18.12.2018. We may note that the Order under section 143(3) read with Section 153B of the I.T. Act cannot be revised without revising the approval of the JCIT. It is also an admitted fact that the Learned PCIT did not revise the approval of JCIT given under section 153D - As decided in DR. ASHOK KUMAR, PROP. SS. NURSING HOME [2012 (8) TMI 429 - ALLAHABAD HIGH COURT] tribunal has not committed any error of law in setting aside the order of CIT passed under Section 263 of Income Tax Act. Also see SHRI SURENDRA L. HIRANANDANI VERSUS PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL – I MUMBAI [2018 (2) TMI 2025 - ITAT MUMBAI]

Since in the present case A.O. passed the impugned assessment order after getting approval from the JCIT under section 153D of the I.T. Act, therefore, following the above decisions, we are of the view that the Learned PCIT has no power to revised the Order under section 263 of the I.T. Act, without revising the approval of the JCIT under section .

Nature of receipt - compensation for non-delivery of the Villa under Builder-Buyer Agreement - Whether the compensation received by the Assessee is capital receipt of revenue receipt? - Whether such compensation is taxable under the Head "Capital Gains"? - whether amount received for giving-up that right would amount to capital receipt under section 2(47) of the Income Tax Act for relinquishment of the asset or extinguishment of any right therein.? - HELD THAT:- It is clear that the compensation received by the assessee on cancellation of the Builder-Buyer Agreement is capital receipt and taxable as capital gains. The view of the A.O. was, therefore, in accordance with Law and cannot be impeached by the Learned PCIT - we do not subscribe to the view of the Ld. D.R. that since no compensation is mentioned in the Builder-Buyer Agreement are to be payable as per agreement, then, the compensation is revenue in nature. It is devoid of merit as discussed above. We also do not agree with the submissions of the Ld. D.R. that payment of compensation was a colourable device to evade the taxes - D.R. referred to the emails and other papers seized from the computer of Shri Gaurav Jain, Ex-Employee of the M3M Group to support the case of the Revenue - we do not agree with such view and discuss this issue separately about the admissibility of the documents found from the computer of Shri Gaurav Jain. In view of the above findings, we hold that the compensation received by the assessee on account of cancellation of the Builder Buyer agreement is capital receipt and was rightly offered as capital gain in the return of income and correctly accepted by the A.O - Decided in favour of assessee.

Whether Arbitration Award is reasonable, based on material facts, final, binding and admissible in Income Tax proceedings? - HELD THAT:- Ultimately, it is a fact that there was a delay of 07 years in not handing-over possession of the Villas by the Builder to the Assessee. Therefore, the Arbitrator considering the entire material facts on record rightly considered that time was the essence of the agreement and that there is a contractual obligation of the Builder to pay compensation to the assessee on account of non-delivering of the Villas. Therefore, the Award is based on scientific examination of the relevant facts and as such the Learned PCIT was not justified in rejecting the Arbitration Award in the matter. It may be reiterated again that Arbitration Award is final and binding on the parties and enforceable as it were the Decree of the Court - No justification for the Learned PCIT to reject the Arbitration Award or to hold that agreement and transaction was coloured and sham. We, therefore, hold that Arbitration Award is final, binding and is admissible in Income Tax proceedings in the case of the assessee and compensation granted in the Award is reasonable which is ultimately paid to the assessee. Issue No. 3 is, therefore, decided in favour of the assessee.

Whether copies of documents, emails and Power Presentations found from Computer of Shri Gaurav Jain, Ex-Employee of M3M Group seized in search from his residence on 21.07.2016 is admissible in evidence? - HELD THAT:- As copies of the documents, emails and Power Presentations found from the Computer of Shri Gaurav Jain Ex-employee of M3M Group who is a third party. No incriminating material was found from the possession of the Assessee or MIPL. No corroborative evidence has been brought on record to support the material found from the Computer of Shri Gaurav Jain. Therefore, in the absence of any corroborative evidence, same is not admissible in evidence. Further, no Certificate under section 65B(4) of the Evidence Act have been brought on record to prove the contents of copies of documents, emails and Power Presentation found from the Computer of Shri Gaurav Jain. Therefore, same is not admissible in evidence. The decisions relied upon by the Learned Counsel for the Assessee squarely apply to the facts and circumstances of the case. Thus, the Learned PCIT considered an inadmissible evidence in proceedings under section 263 of the I.T. Act, 1961. Therefore, the Order under section 263 is perverse. So, no planning is proved by the Revenue if at all for evading the taxes in the matter. Issue No. 4 is decided in favour of the assessee.

Whether compensation received by assessee is taxable as income under section 2(24)(i)(vi) and (iv) of the Income Tax Act, 1961 OR under section 2(28A) of the Income Tax Act, 1961? - HELD THAT:- Since the Order under section 263 of the I.T. Act, 1961 dealt with these Sections which are not covered by the show cause notice issued to the assessee, therefore, it is not permissible to decide the issue against the assessee. It may also be noted that we have already held on Issue No. 2 that the compensation received by the assessee is capital in nature on which assessee has correctly declared capital gains, therefore, it is not taxable in the hands of the assessee as income as is held by the Learned PCIT. Issue No. 5 is decided in favour of the assessee.

Whether the Learned PCIT was justified in invoking the jurisdiction under section 263? - HELD THAT:- As already held that view of the A.O. that compensation received by assessee on cancellation of the BBA is capital receipt and liable for capital gain is in accordance with Law and is sustainable and if the Learned PCIT did not agree with the same view, the same is not revisable under section 263 of the Income Tax Act, 1961. The Learned PCIT is not entitled to re-appreciate the same evidences and material nor come to a different conclusion. The Learned PCIT did not make any independent enquiry as to how the assessment order is erroneous and prejudicial to the interests of Revenue. The Learned PCIT has not pointed-out as to how there is an incorrect application of Law or incorrect application of facts. It is also not explained as to how there was non-application of mind on the part of the A.O. and as to how the compensation is taxable as revenue receipt when it is inextricable link to the allotment of Villa. The Learned PCIT has referred to the rates of sales unofficially obtained from some broker in the notice. These are not relevant being unauthenticated and based on no evidence. Inadequacy of consideration in the agreement would not make the contract void or voidable under Indian Contract Act. In notice, report of Registered Valuer Mr. M.N. Bhagat in October, 2012 to the Investigation Wing for change in area/construction etc., already on record and considered in A.Y. 2013-2014 which have become final. Considering the facts of the case above, it is clear that conditions of Section 263 of the Income Tax Act are not satisfied in the present case.

Whether cryptic Order of the assessment can be revised under section 263? - HELD THAT:- In the present case the issue based on BBA was coming-up from A.Y. 2010-2011 and with reference to Section 54F of the Income Tax Act, 1961, the issue have been examined by the Revenue Department in A.Ys. 2010-2011 and 2013-2014 and assessment orders have been passed under section 153A of the Income Tax Act, 1961. Those Orders have become final and cannot be commented upon in the present proceedings. The copies of the show cause notice, Order-Sheets, replies submitted by the assessee along with documentary evidences in the proceedings for the assessment year under appeal are filed in the Paper Book which shows that A.O. examined the issue in detail after conducting detailed enquiry. The A.O. also discussed the matter in issue with his Administrative Senior Officer i.e., JCIT. Since the compensation was received on account of cancellation of the BBA, therefore, A.O. accepted the claim of assessee of capital gains. The entire material on record clearly show that A.O. has applied his mind and even if the details of enquiry are not mentioned in the assessment order would not make the assessment order to be cryptic or liable for revision under section 263 of the Income Tax Act, 1961. The assessment order is also passed after getting approval under section 153D of the Income Tax Act, 1961, therefore, unless the same is also revised, the assessment order cannot be revised by the Learned PCIT. In view of the above, issue No. 7 is decided in favour of the assessee.

Whether where an approval under section 153D of the Income Tax Act, 1961 is not valid, then the assessment order under section 153B/143(3) of the Income Tax Act, 1961 is vitiated, so same cannot be revised under section 263? - HELD THAT:- A.O. was justified in passing the assessment order Dated 18.12.2018 accepting the returned income because his view was in accordance with Law that compensation received by assessee on account of cancellation of BBA through Arbitration Award is capital receipt and liable for tax as capital gain. Therefore, the Learned PCIT was not justified in invoking the jurisdiction under section 263.