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2015 (7) TMI 44 - ITAT KOLKATA

2015 (7) TMI 44 - ITAT KOLKATA - TMI - Revision u/s 263 - proceeding under section 263 has been invoked against the order passed by the Assessing Officer under sect ion 147 read with sect ion 143(3) - Held that:- A perusal of the order of the CIT indicates that the assessment order passed by the Assessing Officer under section 147 read with section 143(3) was set aside on various grounds and Items No. 1 & 2 relating to the share of assessee in the property as well as the nature of the receipt of .....

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place of finding of the Assessing Officer until and unless the view taken by the Assessing Officer is unsustainable in law. No cogent material or evidence was brought to our knowledge by the ld. D.R., which may prove that the decision taken by the Assessing Officer is not sustainable in law on these two issues. The order passed by CIT is illegal without jurisdiction on these issues. So far as these issues are concerned, the order passed by the CIT cannot be sustained if such type of order is sus .....

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n 143(3).

As coming to the other issues taken in show-cause notice on the basis of which the CIT has invoked the jurisdiction under section 263, ld. A.R. did not advance any argument in all these issues. We also noted that the Assessing Officer has not made any enquiry whatsoever in respect of the other issues as has been taken by the CIT in the show-cause notice and in respect of which order under section 263 has been passed. Even no query has been raised in the notice issued under .....

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the Appellant :Shri R.N. Bajoria, A.R. and Shri Miraj D. Shah, A.R. For the Respondent : Shri Ajay Kumar Singh, CIT, D.R. ORDER Per P.K. Bansal: All these appeals involved common issues challenging the validity of the proceedings initiated under section 263 therefore, all these appeals are decided by this common order. 2. Both the parties agreed that all these appeals be disposed of on the basis of the facts involved in the case of Sudershan Prasad Bagaria in ITA No. 927/Kol/2014 as the issues i .....

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hout jurisdiction and the CIT erred in holding that the assessment order was erroneous an prejudicial to the interest of revenue and in setting it aside for fresh assessment. 2. For that none of the reasons stated by the CIT for treating the assessment order as erroneous and prejudicial to the interest of revenue is valid or legal and none of the decisions relied upon by him is applicable in the facts and circumstances of the instant case. 3. For that the assessment under sections 1471143(3) was .....

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gards the extent and nature of ownership of the appellant in the Delhi property are arbitrary, erroneous, unreasonable and perverse and he erred in directing enquiry in that behalf. 6. For that the CIT erred in holding that the AO had not examined the taxability of the correct amount received from Delhi Administration. 7. For that the CIT erred in holding that the amount received from Delhi Administration was fair rent or revenue receipt taxable as income from other sources or was not damages/me .....

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awarded by the ld. Arbitrator Ms. Leila Seth, retired Chief justice, appointed by the Hon ble Delhi High Court. The assessment was completed under section 143(1) on 20.03.2011. While in the case of Ranglal Bagaria, HUF, Dhanraj Bagaria ,the assessment has been completed under section 143(3) vide order dated 28.12.2011. In the case of Krishna Pradsad Bagaria, assessment under section 143(3) completed vide order dated 27.12.2011. Subsequently a notice under section 148 dated 07.04.2011 was issued .....

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i High Court. By an interim order, the Hon ble High Court (Divisional Bench) ordered Delhi Administration to pay ₹ 4, 00, 00, 0001- (Rs. Four Crores) which the Co-owners were allowed to withdraw. Finally the Divisional Bench of the Hon'ble Delhi High Court also quashed the acquisition proceedings, and an arbitrator was appointed to finalise the matter regarding damages. The matter ultimately went to the Supreme Court who, in the F Y 2004-05 (Asst. Yr.2005-06) upheld the decision of the .....

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e. In view of the above, I have reason to believe that income chargeable to tax has escaped assessment by ₹ 5.09 crores within the meaning in section 147 of the I.T. Act 1961." 4. In response to the notice u/s.148 Shri Sudershan Prasad Bagaria filed his reply dtd.12.04.2011 on 13.04.2011 and requested to treat the return already filed as a return u/s.147 also. Notices u/s. 143(2) & 142(1) dated 13.06.2011 were received from the ACIT, Circle-43, Kolkata, in response to which reply .....

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led on 09.11.2011 and letters dated 22.11.2011 & dated 23.11.2011 filed on 24.11.2011. 5. In the course of hearing, one of the queries raised was with reference to the damages received by the assessee amounting to ₹ 6.09 crores and share of the assessee, in response to which detailed submissions were made by the assessee by his letter dated 09.12.2011 in which it was submitted that the damages received from the Delhi Administration were ₹ 23,79,52,734/- as per paragraph 40 of Arb .....

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and several judicial decisions, the JCIT accepted the contention of the assessee with regard to ₹ 5.94 crores but treated ₹ 14,11,816/- as revenue receipt though no penalty proceeding was initiated by the JCIT as discussed in Para-16 (6) & (7) of the assessment order. The assessment under section 143(3) read with section 147 was completed after several hearings and after discussing the points involved at length. Similar types of enquiries were made for share in compensation in t .....

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39;ble Justice Leila Seth (Retd.), the arbitrator, there are three claimants namely Shri Dhanraj Bagaria, Shri Krishna Parshad Bagaria and Shri Sudharshan Parshad Bagaria. Thus you should have shown your share as 1/3rd instead of 1/4th . The Assessing Officer neither raised any query nor took any cognizance of this fact determining your share of income and receipt of money as award. The Assessing Officer has accepted your share as 1/4th instead of 1/3rd which is erroneous and prejudicial to the .....

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as taken the view which is not only erroneous but also prejudicial to the interest of the revenue. (iii) You own two residential properties namely 18G, Alipore Road and 8/4B Alipore Park Road, Kolkata. You are residing at 165, Chittaranjan Avenue, Kolkata. Therefore, the rental income U/S 23(1) of Income Tax Act, 1961 should have been assessed in respect of these properties which have not been done by the Assessing Officer. (iv) The perusal of profit & loss account of Country Agencies (your .....

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hus, there is concealment of sales and violation of provision of section 44AB of 1ncome Tax Act, 1961. Therefore, you were under obligation to get your accounts audited which you have not got it done. The Assessing Officer neither raised any query nor took any cognizance. The Assessing Officer has accepted your sales at lesser amount & accepted un-audited accounts and did not initiate penalty proceedings U/S 271 B thereby making the assessment order as erroneous and prejudicial to the intere .....

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balances in the individual bank account and making huge payments and receipts from this account. You have not maintained any books of accounts in respect of these bank deposits. The perusal of bank statement reveals that there is no narration to each debit and credit entry in the said bank accounts statements. Thus it can safely be held that the Assessing Officer has merely placed these statements on record rather than have a close and deep look in to the nature of transactions in these bank st .....

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making the assessment order as erroneous and prejudicial to the interest of the revenue. (vii) The shares transactions by the assessee has been allowed without any third party verification without making due enquiries and investigation of the huge amounts involved making the assessment order as erroneous and prejudicial to the interest of the revenue. (viii) You have transferred an amount of ₹ 11, 00, 000/- to your wife at a very nominal interest. The Assessing Officer has not examined the .....

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de his letter dated 24.03.2014 as under:- In response to the show-cause notice I state that the assessment was completed by the A.O. after detailed scrutiny and after examination of the necessary details, bank statements and other evidences, documents & considering judicial decisions. Therefore assessment so made is not erroneous and prejudicial to the interest of revenue and the provisions of sec. 263 are not attracted in respect of this assessment. In this connection I would like to invite .....

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in law that the powers u/s 263 of the Income Tax Act 1961 can be exercised only when the assessment order is 'prejudicial to the interests of the revenue' as well as erroneous order. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken o .....

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Learned Commissioner of Income Tax exercised his powers u/s 263 of the IT Act 1961 merely to substitute his view with that of the assessing officer which is beyond the scope of his powers u/s 263 of the I.T. Act 1961. In the case of CIT -Vs- MAX India Ltd. 295-ITR-282 (SC) the Hon'ble Supreme Court has held that the phrase" prejudicial to the interest of the Revenue" in sec.263 of the Income tax Act, 1961 has to be read in conjunction with the expression "erroneous" orde .....

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order prejudicial to the interest of Revenue. Further it is well settled in law that there is a distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Income-tax Act, 1961, merely because he had a different opinion hi the matter reliance in this regards is made on the decision of the Delhi High Court in the case of CIT v. Anil .....

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Sri Sudarshan Prasad Bagaria and thus 1 should have shown my share as 1I3rd instead of 1/4th and the Assessing Officer has accepted my share as 1/4th instead of 1/3rd which is erroneous and prejudicial to the interest of revenue" is wrong and misconceived. The property at 3, Tilak Marg, New Delhi was owned by four co-owners and my share was 1/4th is mentioned in Para-I of the assessment order itself. I have received 1/4th of the total damages and the compensation amount of ₹ 5.09 cror .....

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perty is M/s. Ranglal Bagaria (HUF) represented by undersigned as Karta. This fact is also mentioned in my letter dtd.09.12.2011 filed before the Ld. JCIT, Range- 43, Kolkata, copy of which is enclosed for your ready reference as Annexure-B. i) Your observation that the award dtd. 30. 09. 2006 clearly reveals that "the said payments are not mesne profits but fair rent" is also misconceived. This point has been thoroughly considered by the Addl. CIT in his assessment order dtd.27.12.201 .....

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quisition was wrongful and the property should be restored back to the owners. The appeal filed by the DA against this order of the single - Judge was also dismissed by the Division Bench of the Court by their order dtd.22, 03,2002 and upheld by the Hon 'ble Supreme Court's order dtd.28.04.2004. For continued wrongful occupation of the said property the Delhi High Court directed payment of damages /compensation by the DA to the owners. In the proceedings before the Hon'ble Delhi High .....

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he said amount was received by the owners on April 2, 2008, Accordingly the assessee has received his 1/4th share of ₹ 6.09 crores in the total compensation paid by the Delhi Administration. My total share (1/4th share) towards the damages amounted to Rs..5,94,88,184/- and ₹ 14,11,816/- towards interest and cost. The receipt of ₹ 5, 94, 88,188/- towards damages was "mesne profits" i.e. damages for wrongful possession of property. In my case the damages were paid on th .....

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ty by Delhi Admn. through its office is illegal and is in the nature of tress pass on the property. Petitioners have submitted that the market value of the property as of today as per Government rates would be ₹ 14,000/- per sq.mtr. and would be ₹ 14 crores. To this amount if solatium at the rate of 30% under the Land Acquisition Act and interest w. ej 1987 are added the total amount payable under the Act would be over ₹ 21 crores. if the calculation are to be based on the mark .....

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se. I accordingly appoint Ms. Leila Seth, retired Chief Justice of Himachal Pradesh High Court as the Arbitrator who will enter upon the reference within four weeks of the communication of this order to her She may make the award within four months thereafter. The arbitrator will not be obliged to give reasons for his conclusions ". It is relevant to submit that the Delhi High Court in the above decision has expressly stated that the possession of the Delhi Administration was in the nature .....

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llows: "mesne profits" of property means those profits which the person in wrongful possession of such property actually received or might with ordinary diligence have received there from, together with interest on such profits, but shall not include profits due to improvements made by the person in wrongful possession" The order of the Delhi High Court was very precise as to the fact that the damages were to be computed by the Arbitrator. Even the Arbitrator in her order at Paras .....

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etitioners within one month from today as the notification in question is held to be illegal and bad in law. The possession of the petitioner's property by Delhi Admn. through its office is illegal and is in the nature of trespass on the property". 14. The learned judge also holds that the claimants are entitled to damages from 10th March 1987 till payment. As to what should be the amount of damages would be determined by the arbitrator and the arbitrator was appointed only to ascertain .....

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y. The basis of fair rental adopted by the Ld. Arbitrator was only to arrive at the amount of damages to be awarded which is clearly stated in the last part of Para-22 reading as under. "Consequently damages will be claimable not on the basis of mesne profits but on the basis of fair rent. So, the fair rent will have to be ascertained ". It is thus clear that the determination of the damages made on the basis of fair rent was only a method for determining the damages, and it cannot be .....

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yond the direction of the court and has acted in excess of jurisdiction The role of the arbitrator is to arbitrate within the terms of the contract. It is a case of error in excess of jurisdiction The assignment to Arbitrator was 10 determine the amount of damages and not to give reasons for the same or comment on its nature. The nature of the receipt has been clearly mentioned as damages by the Hon 'ble Delhi High Court in their order dtd.2 7. 05.1994 which is the relevant order in the matt .....

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ounts are recovered back, cannot change the character of the payments as damages. The Division Bench has clearly spoken about damages which are quoted as under. "The withdrawal by the respondents of these amounts shall be towards such damages payable as per the award that may be passed by the arbitrator for occupation of the property for 10.03.1987". After the award is made by the arbitrator, in any case part of this amount now received by respondents becomes recoverable by the appella .....

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rs were deprived of the use and occupation of the capital assets. Further part of the damages was received in the Asst. Yr.2005-2006 were also accepted as capital receipt by the CIT(Appeals) (Copy enclosed as Annexure-C). After considering all these facts, court orders & decisions the receipt of Rs..5,94,88,184/- was rightly treated by the Addl. C.I.T. as capital receipt and not liable to tax and the order was neither erroneous and prejudicial to the interest of revenue. With regards to your .....

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income u/s.23(1) of the l T. Act, 1961 should have been assessed in respect of the two residential properties namely 18G, Alipore Road and 814B, Alipore Park Road is wrong, incorrect and misconceived. A specific query was raised by the JCIT in his notice u/s.142(1) dtd.24.10.2011 at SI. No.9 with regard to these properties and in response to the said query an explanation was given in my reply dtd.22.11.2011 filed with and considered by the JCIT. A copy of the said notice dtd.24.10.2011 & re .....

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hased the residential property at 18G, Alipore Road, Kolkata on 19.06.2008 and started to resides there w.e.f. 26.10.2008. However, my mother continued to reside at 165, Chittaranjan Avenue, Kolkata being our ancestral house. iii) Your observation that the turnover of my proprietorship concern exceeded ₹ 40 lacs and the Assessing Officer has accepted un-audited accounts and did not initiate penalty proceedings uls.271B is not correct. iv) My turnover of the business was Rs..39,86,725/- onl .....

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f sec.40A(2) can be applied only in respect of any expenditure the payments of which have been made to any person as referred in sub-clause-(b). In my case no payment was made in respect of any expenditure to M/s. Rangdev Holdings Pvt. Ltd rather I have received payment on account of sales made to them. Therefore, the provisions of sec.40A(2) are not attracted in my case. vi) Your observations that I am maintaining huge bank balances and not maintained any books of accounts in respect of these b .....

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yance Deed was also filed before the A.O The allegation that the A.O passed the order without making any enquiry and investigation of the huge amounts involved is wrong and misconceived and on this count the assessment order is not erroneous and prejudicial to the interest of revenue. vii) The various enquiries were raised by the JCIT with regard to share transactions as per Annexure to notice u/s.142(1) dtd.24.10.2011. All the details and particulars with regard to share transactions were accor .....

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closed as Annexure-F. This fact is available in details of loan given filed with the A.O. on 17.10.2011 along with vide letter dtd.15.1O.2011. Since the payment of ₹ 11,00,000/- was not made to wife, the question of any application of sec. 64 of the I.T. Act, 1961 does not arise and the assessment order is neither erroneous nor prejudicial to the interest of revenue on this count also. ix) The Assessing Officer was right in not initiating the penalty proceeding u/s.271(1)(c) because the ad .....

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eous and prejudicial to the interest of revenue. 1, therefore, humbly request your goodself to kindly consider the matter judicially and sympathetically and drop the proposed revision proceedings u/s.263 under intimation to me and oblige. 8. The CIT during the course of hearing raised queries also, and the assessee pointed out that in the impugned property ultimately the shares of each owner remain as under:- Dhanraj Bagaria..........................................1/4th share Krishna Prasad Bag .....

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t the rent receipt during the period of occupation by the Delhi AdlI'inistration although is named as mesne profits by the assessee but the same are taxable as revenue receipt and income from other source ncome Tax Act, 1961. No law prohibits taxation of rent received by the assessee. Once the money is received, the provisions of Income Tax Act are applicable and it is only the provision of Income Tax Act, 1961 that determines whether the money received is taxable for Income Tax purposes or .....

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contended that the assessee's m-other is residing in this house. Further, it has been noticed that the assessee has not brought any document! evidence to show that the property at 8/B, Alipore Road is acquired for the purpose of business. The assessing officer did not enquire at all what steps were taken by him to show that it is meant for real estate business. By doing this the assessee has not merely evaded the income tax but also wealth tax. Section 22 of the Income Tax Act charges the a .....

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der section 23(2) i.e. self occupied property cannot be availed in more than one house. It is settled proposition of the law that an incorrect assumption of the fact or an incorrect application of law would satisfy requirement of order being erroneous under section 263 of the Income Tax Act 1961. 28. Issue No. 4:- On the issue of non audit of the books of accounts, it has been stated that the bill discounting charges and sales tax/ VAT cannot be part of turnover. The contention of the assessee i .....

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-On the issue of applicability of section 40A(2) of the Income Tax Act, during the course of discussion, it was brought to the notice of the assessee that the assessee has earned a loss of ₹ 5,90,645/- from the proprietorship firm by selling the products to the related party. The Assessing Officer neither made any enquiry nor took any view on this issue. The assessee could not give any satisfactory reply except that it is not covered under section 40A (2)(b) of the Income Tax Act. By not g .....

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y verified all the bank accounts. The submissions of the assessee do not match with the documents available on the record. It is only during the course of proceedings under section 263 of the income tax Act 1961, that the assessee has given explanation to certain entries as one narrated in the show cause. Therefore, it can be held that the order of the assessing officer on this issue is also erroneous and prejudicial to the interest of revenue as he has not conducted any enquiries on the entries .....

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so erroneous and prejudicial to the interest of revenue. 32. Issue No. 8:- Payment of ₹ 11,OO,OOOI- to Smt. Manju Devi Bagaria:- In view of submission of the assessee, no adverse view is called for. 33. Issue No. 9:- On the non-initiation of penalty under section 271 (1)(c) of the Income Tax Act 1961, it has been stated that the interest income taxed was result of voluntarily surrender by the assessee subject to no penal action. It is apparent from the award that there was an element of in .....

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ssue is also erroneous and prejudicial to the interest of revenue . 10. Thus he was of the opinion that except the issue No. 8 relating to the payment of ₹ 11,00,000/- to Smt. Manju Devi Bagaria, the order passed by the Assessing Officer was erroneous and prejudicial to the interest of the Revenue. In this regard, he relied on the following decisions:- (1) CIT -vs.- Deepak Kumar Garg in IT Appeal Nos. 47, 52 & 64 of 2006 order dated 11.05.2007 reported in [2008] 299 ITR 435 (M.P.); (2) .....

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man 230 (Madras)/ (2001) 248 ITR 611 (Mad.)/ (2001) 171 CTR 154 (Mad.); (6) CIT -vs.- Jawahar Bhattacharjee in IT Appeal No. 2 of 2008 dated 07.02.2012 reported in 209 Taxman 174 (Gauhati); [2012] 341 ITR 434 (Gauhati); (7)CIT -vs.- Deepak Kumar Garg in IT Appeal Nos. 47, 52 & 64 of 2006 dated 11.05.2007 reported in [2008] 299 ITR 435 (MP); (8) CIT -vs.- Assam Tea House reported in 344 ITR 507 (P&H); (9) CIT -vs.- Export House (2002) 175 CTR (P&H) 137; (2002) 256 ITR 603 (P&H); ( .....

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(16) Gee Vee Enterprise -vs.- Addl. CIT (1975) 99 ITR 375 (Del.) After discussing all the decisions, ultimately the CIT set aside the assessment and directed the Assessing Officer to pass a fresh assessment order and re-compute the assessee s income after making further enquiries and giving due opportunity to the assessee by observing as under:- 49. The Assessing Officer has taken an erroneous view and accepting that view and not setting aside the same will cause loss to the revenue, all the mo .....

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rance to the order u/s 263 is further subject to judicial scrutiny, thereby giving the full opportunity to the assessee to express its views before the appropriate authorities. The Department will not have an opportunity if this wrong order has to be accepted although erroneous and prejudicial to the interest of revenue because the Assessing Officer has expressed his opinion although it may be on wrong assumption of facts and application of law. 50. The Assessee has also stated that these issues .....

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erefore, the Assessing Officer was under an Obligation to look into all issues involved in the assessment of this year. The Assessing Officer has not looked into various issues making thereby the order to be erroneous and prejudicial to the interest of revenue. 51. The Assessing Officer has not examined the issue of taxability of ₹ 23.79 crores and has merely accepted the view of the assessee and based his assessment order on the same. The similar orders are also being passed in the cases .....

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007 -OB. This receipt of money is after the sale. It may also be mentioned that the property is a leasehold property but still the cost price of the property as owner has been taken as on 01.04.1981 while determining capital gain. The Assessing Officer in the assessment year 2007- 08 has even accepted the cost as on 01.04.1981 at ₹ 11,91,26,763/- against the value of land of ₹ 1,69,96,660/- as per the notification issued vide letter No. J/22011/3180- LD/(DOI) dated 21.10.1981 by the .....

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f share of the assessee in the property; determine the nature of receipts of income from the award of the arbitrator; the issue of rental income from properties; tax audit under section 44AB of Income Tax Act 1961 and the violation of the same, if any and the resultant penalty proceedings under section 271B of the Income Tax Act 1961; issue of sales to the related parties; verification of debits and credits in the bank statements; verification of shares transactions from the third party and init .....

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ly to the extent indicated in the foregoing paragraphs. The Assessing Officer is directed to pass a fresh assessment order and re-compute the assessee's income after making further enquiries as directed in the foregoing paragraphs and after giving due opportunity to the assessee & perusing the necessary evidence. In the same manner, the notices under section 263 were issued in other cases. In all the cases issue no. 1 and 2 of show-cause notices were the same and ultimately the CIT in al .....

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t appears from the record that Delhi Administration initiated an acquisition proceeding in respect of house property at 3, Tilak Marg, New Delhi, in which the assessee had 1/4th share. The said acquisition proceeding was quashed by the Delhi High Court. Appeal was filed before the Divisional Bench, Delhi High Court. By an interim order, the Hon ble High Court (Divisional Bench) ordered Delhi Administration to pay ₹ 4,00,00,000/- (Rs. Four crores) which the co-owners were allowed to withdra .....

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009-10. A sum of ₹ 1 crore out of damages has already been taxed in the assessment year 2005-06. The balance amount i.e. ₹ 5.09 crores is to be taxed in the AY 2009-10. On perusal of the return filed for the Asst. Yr. 2009-10, it appears that the assessee did not show this income. In view of the above, I have reason to believe that income chargeable to tax has escaped assessment by ₹ 5.09 crores within the meaning in section 147 of the I.T. Act, 1961. Issued notice u/s 148 of t .....

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ply to the notice under section 147 requested to treat the return already filed as it filed in compliance with under section 148. He submitted that ultimately the Assessing Officer treated the same income as capital receipt except the sum of ₹ 14,11,816/-, which represents the interest. The Assessing Officer in this regard issued various notices to the assessee under section 142(1) and in reply thereto the assessee made the submissions vide his reply dated 08.11.2011, 22.11.2011, 23.11.201 .....

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out that no addition was made by the Assessing Officer. Since no addition was made on the basis of the reasons recorded by the Assessing Officer, the Assessing Officer could have not added any other income. On this basis itself, the notice issued under section 263 should have been quashed as the order passed by the Assessing Officer cannot be said to be erroneous and prejudicial to the interest of the Revenue. 14. In respect to the merit so far the share of the assessee and the taxability of th .....

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arious queries, going through the facts, decision of Delhi High Court, Supreme Court and award, the Assessing Officer has taken a conscious decision. Our attention was also drawn towards the assessment order for the assessment year 2005-06, in which the assessee has received ₹ 1,00,00,000/- out of ₹ 4,00,00,000/- allowed as compensation. The Assessing Officer treated the said receipt as revenue receipt in that assessment year but when the matter went before the CIT(Appeals), CIT(Appe .....

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9,00,000/- is duly accepted by the Revenue in assessment year 2005-06. 15. It was also contended that all the four co-owners claimed the receipt to be the capital receipt and the CIT reopened the assessment in the case of all the four co-owners, namely the assessee, Krishna Prasad Bagaria, Dhanraj Bagaria and Ranglal Bagaria, HUF. In the consequential order passed by the Assessing Officer under section 143(3) read with section 263, the Assessing Officer in the case of Krishna Prasad Bagaria as w .....

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t the order passed by the Assessing Officer is erroneous as well as prejudicial to the interest of the revenue must be satisfied. 16. Ld. D.R., on the other hand, vehemently relied on the order of the CIT and contended that if the order passed under section 263 had been revised on various issues and if it is upheld on one of the issues, it has to be upheld. 17. We have heard the rival submissions and carefully considered the same along with the orders of the tax authorities below as well as the .....

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agreed in respect of the issue no. 8 which relates to the transfer of an amount of ₹ 11,00,000/- by the assessee to his wife at a nominal interest. That on this issue the assessment order is not erroneous as well as prejudicial to the interest of the revenue. The first two issues in the show-cause notice are common in all cases relate to the share of the assessee in the property at 3, Tilak Marg, New Delhi and also about the nature of the damages received by the assessee towards the wrongf .....

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for which were duly complied with by the assessee. It is not denied by the Revenue that the Assessing Officer completed the assessment without making any enquiry. We also noted that the revenue even on merit in the case of two co-owners namely Krishna Prasad Bagaria and Ranglal Bagaria, HUF has accepted the plea that the amount so received is a capital receipt even in the order passed under section 143(3) in consequence of order of CIT under section 263. On this basis itself, it can be held that .....

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ee and took the view that the part of amount received under the award is a capital receipt. Against this order of the CIT(Appeals) , which was passed prior to the invoking the provision of section 263 by CIT, the revenue has not come in appeal before Tribunal. This fact has duly been confirmed by ld. D.R. when a query was made by the Bench. This is also a fact that there is no change of facts in the impugned assessment year as compared to assessment year 2005-06 except the quantum of the amount. .....

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ssary to look into the provision of section 263 of the Income Tax Act, 1961. From the reading of section 263, it is clear that the jurisdiction under section 263 can be invoked by CIT only if both the conditions that the order passed by Assessing Officer is erroneous as well as prejudicial to the interest of revenue are fulfilled. If one of the conditions is absent, the order passed by the CIT by invoking the provisions of section 263 will not be legal. The term erroneous has not been defined un .....

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neous until and unless view taken by Assessing Officer is unsustainable in law. It is also apparently clear that the powers of the CIT are three-fold. One is prior to the initiation of the proceedings under section 263, second at the time of initiation of the proceedings, third the final outcome after the initiation of the proceeding. Power of the CIT prior to the initiation includes call for and examine the records of any proceedings under this Act. The word record is very important, because on .....

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s been defined under Explanation (b) of Section 263 to mean that the record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner. The examination of the record is to be carried by the Commissioner prior to the forming an opinion that the order is erroneous and prejudicial to the interest of the Revenue. Once the record is examined and the CIT on the basis of examinat ion of the rec .....

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ring the course of the enquiry cannot be the part of the record of the proceedings when the CIT forms an opinion that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. 19. We noted that the proceeding under section 263 has been invoked against the order passed by the Assessing Officer under sect ion 147 read with sect ion 143(3). The proceedings under section 147 were initiated on the basis of the following reasons recorded:- "Reason for .....

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Crores) which the Co-owners were allowed to withdraw. Finally the Divisional Bench of the Hon'ble Delhi High Court also quashed the acquisition proceedings, and an arbitrator was appointed to finalise the matter regarding damages. The matter ultimately went to the Supreme Court who, in the F Y 2004-05 (Asst. Yr.2005-06) upheld the decision of the Hon'ble Delhi High Court. The arbitrator finalized the damages at ₹ 24.36 crores in which assessee's shares is ₹ 6.09 crores. .....

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n section 147 of the I.T. Act 1961". 20. The reasons recorded clearly state that Delhi Administ ration initiated the acquisition proceeding in respect of the house property being 3, Tilak Marg, New Delhi in which the assessee had 1/4t h share and the said acquisition proceeding was quashed by the Hon ble Delhi High Court and by an interim order Hon ble Delhi High Court has ordered Delhi Administration to pay ₹ 4,00,00,000/- to the co-owners. The co-owners withdrew the said amount. Ult .....

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ecorded was determined at ₹ 6.09 crores. Since ₹ 1 c rore was assessed during the assessment year 2005-06, therefore, the balance sum of ₹ 5.09 crores is to be assessed in the assessment year 2009-10 and on that basis the proceedings under section 147 were initiated. Subsequently the notices were issued to the assessee under sections 143(2), 142(1). The notices under section 142(1) were issued on 13.06.2011, 25.08.2011 and 24.10.2011. The assessee in response to the notices and .....

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uthority on ad-hoc basis. In that case, in addition to the nature of receipt i.e. whether on capital account or otherwise, the y ear of taxability was also in dispute. Ld. CIT(A) noted the following facts: ...the appellant along with others owned a house property being premises No. 3, Tilak Marg, New Delhi, the appellant having 1/4t h undivided share thereon. The property was acquired by the Delhi Administration in the year 1987 under the Land Acquisition Act, 1984. High Court by their order dat .....

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against the judgment of the single judge and also prayed for stay of operation of the quashing order whereupon the Division Bench of the Court passed an interim order directing the Delhi Administration to deposit ₹ 4 crores on ad hoc basis towards compensation for wrongful occupation and holding over the property. The Delhi Administration deposited ₹ 4 crore in pursuance of the Court s order, out of which the appellant withdrew ₹ 1 crore being his 1/4t h share during FY 1995-96 .....

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) amounted to ₹ 6.09 crore. The matter was being agitated by the Delhi Administrative with its SLP being finally dismissed by the Hon ble Supreme Court on 22.04.2004, i.e. the financial year relevant to the assessment year 2005-06. It is on the basis of the Supreme Court order that the AO has taxed this amount of ₹ 1 crore, i.e. 1/4t h share of the appellant against ₹ 4 crore deposited by the Delhi Administration. Vide para 6 of the order, ld. CIT(A) observed that the ad hoc co .....

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viz. Compensation/ solatium/ interest, the receipt being ad hoc in nature. And the question of taxation was accordingly addressed by the ld. CIT(A) and on this count the present case is differing. (2) Incidentally, it is noted that in para 3 of the ld. CIT(A) s above order he had covered the AO s referring in that case in question to the order of Hon ble Calcutta High Court in the case of Krishna Prasad Bagaria (i.e. in the departmental appeal in the assessee s case) in C.A. No. 398 of 2004 for .....

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ted finding of the Calcutta High Court as quoted by the AO is wrong and incorrect. And CIT(A) observed that the observation was in favour of the assessee. In fact, Hon ble Court not at all addressed the issue of nature of receipt but addressed the year of cause of action and identified the year of finalisation of damage for such cause of action. And, the assessee is seen to have accounted for the receipt in the previous year 2008-09 (AY 2009-10) on receipt basis only after the Delhi Administrati .....

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t shall pay to the Claimants an amount for use and occupation of the premises.... and further The respondent shall pay the amounts as indicated above, within two months failing which the respondent shall pay interest by 12% per annum from the date of the award till payment . The assessee now in his present submission clarifies that it is again stated that the arbitrator has merely devised a formula on fair rent basis for determining the damages. There was no such direction by the Court rather th .....

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ssession thereof as a trespasser since 10.03.1987. As per order of the Court the character of the amount awarded by the arbitrator continued to be damages of the property and deprivation of the right of enjoyment of the property by the owner due to wrongful occupation by the Delhi Administration and therefore a capital receipt not liable to tax under the I.T. Act. (4) Regarding the nature of the payment we may refer to the observation of the Hon ble High Court of Delhi in Civil Writ No. 825/87. .....

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property as of today as per government rates would be ₹ 14,000/- per sq.mtr. and would be ₹ 14 crore. To this amount if solatium of the rate of 30% under the Land Acquisition Act and interest w.e.f. 1987 are added the total amount payable under the Act would be over ₹ 21 crores. What would be the damages will be determined by the Arbitrator . (5) Now, while the arbitrator identified the damage payable as for use and occupation, the assessee places his case as damages for depriv .....

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act cannot be accepted as a payment on account of deprivation of possession or any solatium rather an amount payable on account of late payment of compensation though sometime described in their context as damage. And it is not necessary that in the I.T. Act that has to be accepted as such without probing into the true nature of the receipt although it is equally admitted that it is not always beyond any controversy. To my opinion, with all the due respect to the various authorities covered by t .....

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er to the discussion my Authorized Representative had with you, I still maintain that the amount of ₹ 14.12 lac received by me in excess of calculation as per para 40 of the Arbitration award is part of the damages and not liable to tax as discussed in my submission dated 09.12.2011. However, to buy peace and avoid multiplicity of litigation I hereby offer the excess amount of ₹ 14.12 lac received towards interest and cost from Delhi Administration as my income and agree to pay tax t .....

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ct in this case and the addition is only due to difference of opinion and therefore the assessee s request for not initiating penalty proceedings is in conformity with the position of law . 21. From the said finding of the Assessing Officer, it is apparently clear that the Assessing Officer had duly examined the issues relating to the damages received by the assessee on the order of the Hon ble High Court and the Assessing Officer consciously took the view that the amount so received by the asse .....

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t the Assessing Officer should discuss in detail the finding in his order, although the Assessing Officer has given clear-cut finding. 23. If the Assessing Officer has not discussed the inquiry made by him in the case of assessee in respect of which, he issued show-cause to assessee, we cannot say that order is erroneous as the Assessing Officer has not made any inquiry into the matter. The assessee cannot dictate the Assessing Officer what should he incorporate in the assessment order and how h .....

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Tax Officer on being satisfied with the explanation of the assessee. This decision of the Income Tax Officer could not be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the disallowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expe .....

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698 (Alld.) has held under para no. 12 as under:- As held by this Court in the case of Goyal Private Family Specific Trust (supra), we are of the considered opinion that merely because the ITO had not written l engthy order, it would not establish that the assessment order passed under section 143(3)/148 of the Act is erroneous and prejudicial to the interest of the Revenue without bringing on record specific instances, whi ch in the present case, the CIT has failed to do . No contrary decision .....

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submissions and documents furnished by him and no material whatsoever has been brought on record by the CIT which showed that there was any discrepancy or falsity in evidences furnished by the assessee, the order of the AO cannot be set aside for making deep inquiry only on the presumption and assumption that something new may come out. For making a valid order under section 263 it is essential that the CIT has to record an express finding to the effect that order passed by the AO is erroneous .....

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authority is erroneous and prejudicial to the interest of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the revenue, but orders which are passed after inquiry/investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interest of the revenue because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scruti .....

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or in the order passed unless and until the view taken by the AO is unsustainable in law. The said view has been taken by the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC) wherein their lordships has held as under :- "The pre-requisite to the exercise of jurisdiction by the Commissioner under section 263 is that the order of the AO is erroneous insofar as it is prejudicial to the interests of the revenue. The commissioner has to be satisfied o .....

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that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interest of the revenue has to be read in conjunction with an erroneous order passed by the assessing officer. Every loss of revenue as a consequence of the order of the assessing .....

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earned by a person is assessed as income in his hands on his so offering the order passed by the assessing officer accepting the same without application of mind as such will be erroneous and prejudicial to the interest of the revenue 1 29. A perusal of the order of the CIT indicates that the assessment order passed by the Assessing Officer under section 147 read with section 143(3) was set aside on various grounds and Items No. 1 & 2 relating to the share of assessee in the property as well .....

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essment order passed by him, the CIT cannot substitute his view in place of finding of the Assessing Officer until and unless the view taken by the Assessing Officer is unsustainable in law. No cogent material or evidence was brought to our knowledge by the ld. D.R., which may prove that the decision taken by the Assessing Officer is not sustainable in law on these two issues. The order passed by CIT is illegal without jurisdiction on these issues. So far as these issues are concerned, the order .....

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