TMI Blog2014 (7) TMI 635X X X X Extracts X X X X X X X X Extracts X X X X ..... does not arise – Relying upon Padmasundara Rao v. State of Tamil Nadu [2002 (3) TMI 44 - SUPREME Court] - the AO has been entrusted the role of an investigator, prosecutor as well as adjudicator under the scheme of the Income-tax Act - the orders passed on an incorrect assumption of facts or incorrect application of law or without applying the principles of natural justice or without application of mind or without making requisite inquiries will satisfy the requirement of the order being erroneous and prejudicial to the interest of the revenue within the meaning of Section 263. The CIT having gone through the assessment record, found that the AO has not made proper enquiry and passed the order in a very cryptic manner by accepting the admitted income though the assessment was reopened to bring to tax capital gains without conducting further enquiry where the situation warrants enquiry - The AO having failed to gather necessary information regarding the share of each vendor in the sale consideration so as to bring right amount to tax, the CIT is justified in exercising his power u/s. 263 of the Act - it is incumbent upon the AO to come to an independent conclusion that the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has filed concise grounds which are as follows: 1. The order of the learned CIT, Tirupati is erroneous both on facts and in law. 2. The learned CIT erred in holding that there is an error in the assessment order passed by the Income Tax Officer, Ward-2, Hindupur u/s. 143(3) r.w.s. 147 of the I.T. Act on 30.03.2010. 3. The learned CIT erred in holding that the Assessing Officer did not examine the determination of the capital Gain and the sources of the deposits made in Canara Bank. 4. The learned CIT erred in holding that the Assessing Officer completed the assessment without considering the facts properly and without examining the case. 5. The learned CIT ought to have found that the assessment was made u/s. 143(3) r.w.s. 147 after duly calling for the required information and after considering the information available on record and there is no error in the order of the assessment. 6. The learned CIT erred in setting aside the assessment made by the Assessing Officer on mere presumptions and imaginations without any basis. 6. Brief facts of the case are that the assessee is an individual, deriving income from agriculture, capital gains and interest filed his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on paid with ₹ 75,630 towards the cost of improvement, levelling of land etc. The genuineness of expenditure has also not been enquired into by the Assessing Officer during the course of scrutiny proceedings. As against ₹ 15,192 of interest income from Canara Bank, the assessee has debited an amount of ₹ 16,5001- towards other expenses restricted to ₹ 15,192/- thereby and arrived at a taxable interest of Rs. Nil. It is not dear as to how ₹ 16,500 expenditure is to be incurred for realizing this bank interest. This is clearly a lapse on the part of the Assessing Officer resulting in erroneous and prejudicial orders. 8. The CIT observed that the assessee has purchased 10 Guntas of land at Kodigehalli, Yelahanka Hobli, Bangalore North on 14.12.2005. The sources are inter alia explained as ₹ 5 lakhs from realization from sundry debtors and ₹ 10 lakhs as received from Mr. Rayappa Reddy, USA. No enquiries were caused by the Assessing Officer about the genuineness of these receipts used for purchasing the property at Kodigehalli. The transactions in the account of the assessee with Canara Bank, Bangalore Hebbal Branch such as cash deposits of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thing nor any additional information furnished to quench the nagging doubts arising from the erroneous assessment. Merely because a substantial chunk of a sale consideration was ordained to be paid to one of the co-sellers without any statutorily recognizable liability, the assessee cannot be absolved from liability on capital gains tax. By not furnishing any material evidence to substantiate that the fair market value was indeed ₹ 1.50 crores only. This aspersion has also not been dispelled. So is the case with receipts from realization of dues from Sundry Debtors and Cheques received from Sri Rayapa Reddy of USA. It is essential that all these matters are to be revisited and re-examined by the Assessing Officer in his file. Accordingly, the CIT set aside the assessment with a direction to make thorough and excessive enquiries as to the taxability of the transactions and genuineness of the receipts. Against this, the assessee is in appeal before us. 10. The learned AR submitted, with regard to merit of the case, that the assessment in this case was completed u/s. 143(3) r.w.s. 147 of the Act on 30.3.2010. At the time of assessment, the assessee furnished sale deed copy, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to various parties has been clearly mentioned in the sale deed and the sale deed was duly furnished to the AO and the AO after carefully going through the said sale deed satisfied with the offer of income by the assessee arising out of the sale transaction of the said property. He opted not to make any addition on this count and the capital gain accrued to the assessee has been duly offered by the assessee and there is no understatement of income by the assessee. Thus, the assessment was reopened to bring escaped income to tax. The AO found that there is no escapement of income. Being so, the CIT cannot find fault with the assessment order so as to exercise jurisdiction u/s. 263 of the Act. The assessment order cannot be termed as erroneous inasmuch as the AO has passed the order after application of his mind on the very same issue considered by the CIT. The AO considered all the information relevant for the assessment and passed the assessment order. The CIT cannot substitute his own views in exercising jurisdiction u/s. 263 of the Act. Simply because the CIT felt that the assessment order is prejudicial to the interests of revenue, that itself would not be enough to vest the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, it cannot be said that it is a case of lack of enquiry . The assessee's case does not fall in the sphere where there was no enquiry by the AO. He submitted that provisions of section 50C are not applicable to assessee's case and there is no material to suggest that the assessment order is erroneous and prejudicial to the interests of revenue. Therefore, according to the AR, the order of the CIT is to be quashed. 14. On the other hand, the learned DR submitted that there is an inherent deficiency in the assessment order. There is no basis of payment of ₹ 1.25 crores to one of the vendors. Therefore, it is to be enquired by the AO the basis for payment of ₹ 1.25 crores to one of the vendors where his proportionate share in the property is not corresponding to the consideration received by him. Finally she relied on the order of the CIT. 15. We have heard both the parties and perused the material on record. In the present case three persons viz., G. Venkata Subbamma, I. Venugopal Reddy and A. Ramireddy joined to sell the following property and the total consideration is ₹ 1.5 crores: (a) 1 Acre 5 guntas situated at Survey No. 15/1, Hebbal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare of their property. Being so, there is error in offering capital gain by the assessee in respect of his share in the property. Thus, it is apparent that the AO in the course of assessment proceedings, though all the materials available on record, failed to cause enquiry regarding the share of assessee in the sale consideration. He just collected the data and without examining the same passed the assessment order, which makes the assessment order erroneous. Where there is under assessment of tax it causes prejudice to the interests of revenue. The contention of the assessee's counsel is that the AO has considered all the relevant aspects of the case carefully while passing the assessment order. According to him, the mere fact that the assessment order passed by the AO was short would neither mean failure on his part in not examining the matter carefully and it would not render his order erroneous so long as the view taken by him was a possible view. In our view, the aforesaid submission of the assessee must fail for the reasons already explained in the foregoing paras of this order, as the order sought to be revised u/s. 263 of the Act reflects no proper application of mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e views are possible. It is difficult to comprehend as to how the Assessing Officer can be attributed to have adopted a permissible course of law or taken a view where two or more views are possible when the order passed by him does not speak in that behalf. We cannot assume, in order to provide legitimacy to the assessment order, that the Assessing Officer has adopted a permissible course of law or taken a possible view where his order does not say so. The submissions made by the learned Counsel, if accepted, would require us to form, substitute and read our view in the order of the Assessing Officer when the Assessing Officer himself has not taken a view. It could have been a different position if the Assessing Officer had adopted or taken a view after analysing the facts and deciding the matter in the light of the applicable law. However, in the case before us, the Assessing Officer has not at all examined as to whether only one view was possible or two or more views were possible and hence, the question of his adopting or choosing one view in preference to the other does not arise. 19. In the case of Padmasundara Rao v. State of Tamil Nadu (255 ITR 147), the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... former can be invoked to remove the prejudice caused to the State the later can be invoked to remove the prejudice caused to the assessee. The provisions of Section 263 would lose significance if they were to be interpreted in a manner that prevented the Commissioner from revising the erroneous order passed by the Assessing Officer, which was prejudicial to the interest of the revenue. In fact, such a course would be counter -productive as it would have the effect of promoting arbitrariness in the decisions of the Assessing Officers and thus destroy the very fabric of sound tax discipline. If erroneous orders, which are prejudicial to the interest of the revenue, are allowed to stand, the consequences would be disastrous in that the honest tax payers would be required to pay more than others to compensate for the loss caused by such erroneous orders. For this reason also, we are of the view that the orders passed on an incorrect assumption of facts or incorrect application of law or without applying the principles of natural justice or without application of mind or without making requisite inquiries will satisfy the requirement of the order being erroneous and prejudicial to the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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