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2015 (7) TMI 616 - ITAT DELHI

2015 (7) TMI 616 - ITAT DELHI - TMI - Revision u/s 263 by CIT(A) - claim of deduction on account of interest was allowed u/s 24 of the Act against the “income from house property” and was disputed by the CIT by observing that the same is not allowable as per third proviso to section 24B of the Act as the assessee had not furnished required certificate from the party or parties to whom this amount of interest was paid - Held that:- On careful consideration of orders of the Tribunal as related by .....

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of the department. In this situation, benefit of the ratio of the orders of the Tribunal as relied by the ld. counsel of the assessee is not available and hence legal contention of the assessee is hereby jettisoned.

Under third proviso to section 24(b) of the Act, the assessee is required to submit a certificate for making claim of interest under this provision and there is no prescribed form of certificate. During the assessment proceedings on the specific query of the AO, the assess .....

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y has been brought out by the ld. CIT or any other revenue authorities therein. If for a moment it is accepted that order is erroneous on account of required certificate but at the same time, the same cannot be held as prejudicial to the interest of the revenue as the claim of interest paid by the assessee has not been alleged as bogus or not correct or not genuine by the ld. CIT. Thus we are inclined to note that the view taken by the AO was a reasonable and plausible view which cannot be said .....

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nce, no addition pertaining to undisclosed investment could have been made. However, as a vigilant tax collecting authority, the AO adopted a conservative approach and deducted ₹ 1 crore from capital gain and taxed the same under the head of income from other sources which obviously attracts higher tax rate, then this action of the AO is more favourable to the revenue which cannot be held as erroneous and prejudicial to the interest of revenue. At this juncture, it would be appropriate to .....

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he issues raised in the show cause notice was made without proper examination, inquiry and verification, therefore, revisional jurisdiction u/s 263 of the Act is warranted in a case where assessment has been made without inquiry or verification. In this para, the CIT contradicts himself in the first sentence. He mentions that the assessment was framed without proper examination, inquiry and verification whereas in the second sentence, he writes that the assessment has been made without inquiry o .....

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rty on the very same date and the AO instead of taxing the capital gain taxed ₹ 1 crore under the head of income from other sources which is a more favourable view for the revenue. In this situation, view taken by the AO in framing assessment order on all three issues cannot be held as unsustainable and not in accordance with law. In this situation, while the CIT himself is not sure about the issue of erroneousness of impugned assessment order, which is vivid from the contents of the notic .....

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th law. The CIT cannot remit the matter for reassessment to AO. Thus invoking of provision of section 263 of the Act by issuance of notice and passing impugned order, directing the AO to revisit the issue and to make further inquiry cannot be held as valid. Thus impugned order passed u/s 263 of the Act are quashed. - Decided in favour of assessee. - I.T.A.No.5701/Del/2014 - Dated:- 8-7-2015 - Shri J.S. Reddy and Shri Chandramohan Garg, JJ. For the Petitioner : Dr. Rakesh Gupta, Shri Ashwani Tane .....

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, Central-II, New Delhi {hereinafter referred to as the "CIT"} erred in assuming jurisdiction u/s 263 of the Act. 2. That on facts and in law the CIT erred in holding/observing that the original order of assessment dated 281h December 2011 is erroneous /prejudicial to the interest of revenue on following counts: a. Allowing deduction u/s 24(b) of the Income Tax Act. b. Not considering for taxation alleged income of ₹ 1 cr being alleged unaccounted payment for purchase of property .....

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g aside the order of assessment dated 28th December 2011 for a de novo adjudication on issues mentioned above. 2. Briefly stated the facts giving rise to this appeal are that a search and seizure operation was carried out in Mahesh Mehta group of cases on 30.6.2009. During the course of search at the residential premises at BA-17A, DDA Flats, Phase-I, Ashok Vihar, Delhi, certain documents belonging to the assessee were found and seized. On the basis of said documents so seized and after recordin .....

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on 25.3.2010. 3. Subsequently, on examination of assessment records, the CIT observed that the assessment order passed by the AO dated 28.12.2011 (supra) is erroneous as well as prejudicial to the interest of revenue to the extent that assessment was completed without proper examination, inquiry and verification on three issues viz. claim of interest expenses amounting to ₹ 6,36,111/-, issue of transaction of ₹ 1 crore with regard to property purchased by the assessee jointly with h .....

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ten submissions through the AR vide letter dated 3.3.2014. After considering the submissions and reply of the assessee, the CIT held that the AO has failed to conduct proper inquiry and verification on the issues contained in the show cause notice. The CIT finally held that the assessment order passed u/s 143(3) r/w section 153C of the Act dated 28.12.2011 is erroneous and prejudicial to the interest of revenue and the CIT invoking provisions of section 263 of the Act set aside assessment order .....

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263 of the Act, assessee s paper book spread over 205 pages and judgements and citations relied by both the parties. 7. Ld. counsel of the assessee submitted that the only issue in this appeal is against the assumption of jurisdiction u/s 263 of the Act by the ld. CIT, which according to the appellant assessee was not in accordance with law and valid. Ld. counsel of the assessee has also filed written submissions which are being reproduced below for the sake of brevity and clarity in our observ .....

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uding the decisions which say that absence of enquiry and not inadequate enquiry can be the ground of holding an order as erroneous. Proceeding under section 263 PB 188-190 is the copy of notice u/s 263 giving the show cause in respect of three issues. PB 191-194 is the reply furnished by the assessee in response to notice u/s 263 submitting inter alia that there was no error nor any prejudice. Scope of section 263 - Revising authority feeling inquiry inadequate -Revising authority must make enq .....

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urther enquiries without a finding that the order is erroneous-ITO vs. DG Housing Projects Ltd. 74 DTR 153 (Del.) Lack of proper enquiry-Assessee having given complete details of the provisions of warranty in response to the query raised by the AO during the course of assessment proceedings and regarding claim of deduction under s. 35DDA AO accepted the assessee's claim after examining the same, order under s. 263 passed by the CIT cannot be sustained -CIT vs. Hero Auto Ltd. 74 DTR 164 (Del. .....

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sion questioning accounting practice not justified-CIT vs. Sunbeam Auto Ltd. 332 ITR 167 (Delhi) 243 ITR 83(SC) Following pleadings and evidences would support the case of the appellant:- 1) Deduction on account of interest was allowed u/s 24 against the 'income from house property' though requisite certificate in terms of section 24(b) was not filed by the assessee. PB 6-10 is the copy of computation of income, acknowledgment of return for A.Y. 2009-10, in which the assessee has shown d .....

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onfirmation of loan. PB 152-153 is further submissions dated 02.12.2011 field to td. A.O. during the course of assessment proceeding submitting the copy of bank accounts, and further submitting about the loan from HDFC bank and about the payment of interest on housing loan. PB 156-157 is further submission of the assessee dated 05.12.2011 filed during the course of assessment proceeding again submitting about the claim of the interest of housing loan. PB 158 is the copy of HDFC bank statement sh .....

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e from other sources. PB 1-5 is the copy of the statement recorded of the husband of the appellant during the course of survey in which the husband of the appellant was clearly asked about the details of various properties and consideration received and also about the purchase of Property No. 56/7, DB Gupta Road, Karol Bag, New Delhi and sale of Property No. 783/161, DB Gupta Road, Karol Bag, New Delhi in which the appellant's husband clearly stated that amount of ₹ 2 Crore to be paid .....

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hi and other properties PB 11-14 is the copy of questionnaire dated 30.06.2011 issued by Ld. A.O. during the course of assessment proceeding to show that Ld A.O. asked question relating to search of Mr. Mehta, details of all bank accounts of the assessee, details of all properties and investment made, utilization of money, and is specifically about the purchase of Property No. 56/7, D.B. Gupta Road, Karol Bag, New Delhi involving the alleged unaccounted payment of ₹ 2 Crore PB 15-16 is the .....

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course of assessment proceeding submitting the copy of bank accounts, affidavit of the assessee in respect of additional income in respect of sale of Property No. 783/161, DB Gupta Road, Karol Bag new Delhi, & further submitting about the loan from HDFC bank and about the payment of interest on housing loan. PB 154-155 is the copy of affidavit of the assessee filed during the course of assessment proceeding before Ld. A.O., inter alia, submitting that undisclosed investment of ₹ 2 Cror .....

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showing the proceedings before Ld. A.O. and specific query regarding the adjustment of ₹ 2 Crore 3) Sale of other properties PB 183-187 is the copy of assessment order passed u/s 143(3) / 153C with prior approval of Additional CIT, and a plain reading of this order would clearly show that the issue of ₹ 2 Crore was clearly discussed and mind by applied and a decision was taken and capital gain income was brought to tax and so much so nature of part of the capital gain was changed fro .....

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es and investment made, utilization of money. PB 15-16 is the copy of assessee's submissions dated 15.11.2011 filed to Ld. A.O. during the course of assessment submitting the copy of bank accounts, statements of assets and liabilities, note on the property purchased i.e. 56/7, DB Gupta Road, confirmation of loan fact of sale of three properties and furnishing sale deeds. PB 1-5 is the copy of the statement recorded of the husband of the appellant during the course of survey in which the husb .....

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f Property No. 7831160 and 783/162. PB 162-163, 164-180 is the copy of reply dated 01.12.2011 filed by Mrs. Anita Chabra to Ld. A.O. in response to the summon confirming the purchase of Property No. 7831160, DB Gupta Road, New Delhi and giving various details / source and filing the copies of bank statements, her PPF account, PNB salary account, copy of income tax return filed by her etc. PB 181-182 is the copy of order sheet entries showing the proceedings before Ld. A.O. and specific query reg .....

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issible-Income tax Act, 1961-CIT vs. Lahsa Construction P. Ltd. 3571TR 671 (Delhi) - S. 69B-Unexplained investment-Investment in property- No evidence that extra consideration received-Addition to income based solely on report of District Valuation Officer -Not valid- CIT vs. Sadhna Gupta 352 ITR 595 (Delhi) 4) The impugned assessment order was passed with prior approval of an higher authority i.e. Additional Commissioner in terms of section 153D and therefore in view of the following judicial d .....

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f the Act against the income from house property and was disputed by the CIT by observing that the same is not allowable as per third proviso to section 24B of the Act as the assessee had not furnished required certificate from the party or parties to whom this amount of interest was paid. Ld. counsel took us through paper book page no. 6 to 16 and 152 to 158 of the assessee and submitted that as per computation of income and acknowledgement of return, it is clear that the assessee has shown ded .....

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loan from HDFC Bank and payment of interest on housing loan and also copy of HDFC Bank showing the amount of interest paid against housing loan by the assessee. Ld. counsel submitted that on the issue of interest claimed, the assessee properly explained and established the claim as per provisions of the Act which was wrongly disputed by the CIT and explanation in this regard was not properly considered by the CIT. 9. Ld. counsel of the assessee, on the issue of unaccounted payment of ₹ 2 .....

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tal gain was changed from capital gain to income from other sources on justified basis. Ld. counsel further pointed out in the statement recorded during the course of survey, the husband of the assessee was asked about the details of various properties and consideration received and also about the purchase or property wherein the assessee s husband clearly stated that the amount of ₹ 2 crore to be paid by the assessee s husband was never paid but was retained by Mr. Mehta to be set off aga .....

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ies and investment made, utilisation of money and specially about the purchase of property no. 56/7, DB Gupta Road, Karol Bagh, New Delhi involving the alleged unaccounted payment of ₹ 2 crore. Ld. counsel vehemently contended that in the written submission dated 2.12.2011, the assessee filed copies of bank account, affidavit of the assessee in respect of additional income from sale of property no. 783/161 DB Gupta Road, Karol Bagh, New Delhi and also the details of loan from HDFC Bank and .....

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he assessee and submitted that in the impugned assessment order which was passed by the AO with prior approval of the ACIT, it is clear that the issue of ₹ 2 crore was properly discussed and mind was applied, therefore, a conscious decision was taken and capital gain income was brought to tax and so much so, the nature of part of capital gain was changed from capital gain to income from other sources. Ld. counsel of the assessee has further pointed out that in reply to questionnaire dated .....

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erty no. 783/160, CB Gupta Road, New Delhi along with various relevant details, source of funds supported by copies of bank statement, PPF account, PNB salary account and copy of income tax return filed by her. Therefore, the impugned assessment order was passed after due application of mind on this issue and the CIT was not justified in assuming jurisdiction u/s 263 of the Act for revising the assessment order and directing the AO to re-frame the assessment after verification and examination of .....

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on 24(b) of the Act, the second issue of ₹ 1 crore being unaccounted cash payment on purchase of property no.56/7, Deshbandhu Gutpa Road, Karol Bagh, New Delhi was not considered for taxation and third and last issue wherein the AO completed the assessment proceedings without making any inquiries/investigation on the issue of capital gain/income accrued to the assessee along with her husband. Ld. DR elaborately took us through the contents of the notice u/s 263 of the Act (supra) and submi .....

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that the AO has failed to conduct proper inquiry and verification on all three issues raised in the notice u/s 263 of the Act. Ld. DR vehemently contended that in various judicial pronouncements, it has been held that where inquiry or verification is warranted but not done, it would certainly cause prejudice to the interest of revenue and the Commissioner shall be justified in invoking provisions of section 263 of the Act and in remanding the matter back to the AO for making such necessary inqu .....

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se of ITO vs D.G. Housing Project Ltd. (2012) 343 ITR 329 (Del) submitted that the Commissioner cannot remand the matter for a fresh decision to the AO to conduct further inquiry without a finding that the order of the AO is erroneous as well as prejudicial to the interest of revenue and such finding of the CIT that the order is erroneous is a consideration precedent for exercise of jurisdiction u/s 263 of the Act. Ld. counsel pointed out that the compliance of third proviso to section 24 (b) of .....

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amount of loan along with interest which was also certified by the concerned HDFC Bank Branch and when the AO has not raised any doubt about the genuineness of the payment of interest and repayment schedule/statement of accounts with the concerned HDFC Bank branch, then it cannot be said that the AO granted deduction to the assessee without any inquiry and against the provisions of the Act. 14. Ld. counsel on the second issue of over and above payment towards purchase of property situated at 56/ .....

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part of income under capital gain. Ld. counsel has further drawn our attention towards reply of the assessee dated 3.3.2014 submitted before the CIT(A) replying to the notice dated 263 of the Act which is available at pages 191-194 of the assessee s paper book and submitted that the assessee has not either diverted its head of income which she actually earned under the capital gain nor withdrawn her stand which the spouse of the assessee gave in his statement before the survey team. Ld. counsel .....

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rvey cannot be treated and taxed twice, once under the head of capital gains and secondly under the head of income from other sources. Ld. counsel also pointed out that the assessee has already preferred an appeal against the diversion of additional income of ₹ 1 crore from capital gains to income from other sources which is pending before the ITAT Delhi Benches. 15. On the third issue of allegation of the AO that the AO completed assessment without making any inquiry/investigation regardi .....

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16C, Motia Khan, Pahar Ganj, another property at 783/161, Deshbandhu Gupta Road, New Delhi and third property at 8750, Motia Khan, New Delhi and offered the amount of ₹ 1,40,00,057 for taxation under the head of capital gain. Ld. counsel further took us through para no. 3 of the notice u/s 263 of the Act (supra) and submitted that any addition to aforesaid four properties, CIT picked up property no. 783/160, Deshbandhu Gupta Road, Karol Bagh and 49D, MIG Flat, Motia Khan which were not so .....

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t order as he considered unaccounted amount of ₹ 1 crore which was accrued to the assessee from sale of property at 783/161, Deshbandhu Gupta Road, Karol Bagh and also considered unaccounted consideration of ₹ 1 crore which was paid by the assessee as unaccounted consideration towards purchase of property at 56/7, Deshbandhu Gupta Road, Karol Bagh. Ld. counsel also pointed out that the CIT was very casual in mentioning facts in the notice issued to the assessee u/s 263 of the Act as .....

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ain as the source of investment but the AO segregated ₹ 1 crore from this amount and taxed the same under the head of income from other sources which attracts higher tax rate, then this action of the assessee cannot be said to be erroneous and prejudicial to the interest of revenue. But on the other hand, this action of the AO imposed higher tax liability on the assessee which brings more revenue to the department. 16. On careful consideration of above submissions and vigilant and careful .....

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see has placed reliance on the orders of the Tribunal in the case of Goyal Iron & Steel Works (India) vs. Commissioner of Income Tax(supra, Mehta Cut Piece Cloth House vs. Income Tax Officer (supra), Income Tax Officer vs. Arora Alloys Ltd. (supra). 17. Replying to the above, ld. DR has submitted that the ratio of these decisions is not applicable to the facts and circumstances of the present case and ACIT who gave approval u/s 153D of the Act for passing assessment order u/s 143(3) r/w sect .....

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t order which was demolished by the CIT by invoking provisions of section 263 of the Act was passed with prior approval of ACIT, Central Range-2, New Delhi vide F.No.153A-03-Mahesh Mehta/11-12/607 dated 28.12.11. The CIT in any terms cannot be equated with ACIT because CIT holds higher position in the hierarchy of the department. In this situation, benefit of the ratio of the orders of the Tribunal as relied by the ld. counsel of the assessee is not available and hence legal contention of the as .....

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on of the whole or in part of the capital borrowed which remains to be repaid as a new loan. Meaning thereby that for making claim u/s 24(b) of the Act, a certificate specifying the amount of interest payable by the assessee has to be submitted before the AO. From careful reading of section 24 and all three proviso attached to this provisions, we note that there is no mentioning of any proforma on which required certificate has to be given. In absence of any prescribed proforma, the amount of in .....

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has submitted all necessary evidence in respect of interest paid along with this reply in the form of repayment schedule/copy of the bank statement with HDFC Bank. The AO during the assessment proceedings has made inquiry in this regard and after proper and reasonable verification and evaluation of explanation and supportive evidence, submitted by the assessee on this issue, allowed deduction to the assessee. The CIT has objected the allowance of deduction on the allegation of non-furnishing of .....

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the assessee is required to submit a certificate for making claim of interest under this provision and there is no prescribed form of certificate. During the assessment proceedings on the specific query of the AO, the assessee furnished detailed explanation supported by repayment schedule, copy of the bank statement to substantiate its claim and the amount of interest has not been disputed either by the AO or by the CIT. In this situation, merely non-compliance of directory provisions of the Ac .....

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of interest paid by the assessee has not been alleged as bogus or not correct or not genuine by the ld. CIT. 21. Under above noted facts and circumstances, we are inclined to note that the view taken by the AO was a reasonable and plausible view which cannot be said as unsustainable or not in accordance with law and other relevant provisions of the Act on the issue of allowability of deduction or interest paid by the assessee. 22. While considering the second issue of ₹ 1 crore being unacc .....

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inst ₹ 4.51 crore consisting of 1st Floor, IInd Floor and IIIrd Floor with its terrace/roof rights. The registry was done of ₹ 2.51 crore whereas the amount paid to Sh. Mahesh Mehta on behalf of M/s Honest Estate Pvt. Ltd. was ₹ 4. 51 crore. The same fact is repealed in a way or the other in the assessment order in para 5.4, page no. 2, in para 5.7 page no. 4. in para 5.8, page no. 4 etc. This is a clear case of concealed unaccounted transaction of ₹ 1 crore (the other 1 .....

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ng its afresh how he arrived 01 ₹ 40,00,057 - only but he simply took out 1 crore from the Capital Gain and placed it under the head "Income from Other Sources ". 2.2.3 It is to be noted that property situated at 56/7, D.B. Gupta was sold on 17.07. 2008 to Shri Mahesh Mehta and another property situated at 783/161. DB Road was purchased from Honest Estate (P) Ltd. on 11.07.2008. The date of sale of Property is subsequent to the date of purchase of property. This fact shows that u .....

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Income from other Sources" does not imply taxing the unaccounted / concealed income of ₹ 1 crore represented by cash investment in property purchased. The Capital Gain declared by the assessee with proper statement in no way can be reduced or overlapped considering the facts of this case. 2.2.6 Therefore. it is apparent that the assessment order passed by the A.O. is erroneous as well as prejudicial to the interest of the revenue as ₹ 1 crore being unaccounted cash payment on pu .....

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proceedings, the AO showcaused the assessee asking question relating to search of Mr. Mahesh Mehta, details of all bank accounts of the assessee, properties and investment made, utilization of money and there is a specific query about the provisions of property no. 56/7, DB Gupta Road, Karol Bagh, involving the alleged unaccounted payment of ₹ 2 crore out of which ₹ 1 crore pertains to the assessee. We further observe from the copy of the assessee s submissions dated 15.11.11filed be .....

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avour of the assessee, first sale deed was registered on 11.7.2008 and remaining two sale deeds were registered on 17.7.2008. From sale deeds pertaining to property bearing no. 783/160, 161 & 162, DB Gupta Road, New Delhi available from pages 74 to 171 of the asessee s paper book, we note that the assessee and her husband jointly sold one property to Mrs. Anita Chhabra and her son Sitaksh Chhabra, another property to Mrs. Gurcharan Kaur and two parts of this property have been sold to Mr. Ma .....

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783/161 was kept by Mr. Mahesh Mehta as purchase consideration of newly purchased building at 56/7, DB Gupta Road, New Delhi purchased from him i.e. Mr. Mahesh Mehta himself, he was under the impression that no capital gain was to be invoked on this amount. However, in the subsequent part of the answer, assessee s husband submitted that if this is the capital gain against his old building as a part of sale consideration, then he is ready to pay the capital gain tax on this amount subject to no p .....

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16C, Motia Khan, Paharganj, property no. 8750, DB Gupta Road, New Delhi amounting to ₹ 1,35,81,857 and in the calculation of taxable income, income from capital gain has been shown as ₹ 1,40,00,057. At this point, it is relevant to consider the contention of the assessee which were placed before the CIT in reply dated 3.3.2014 to notice u/s 263 of the Act wherein at page 5 middle para, it has been mentioned that the purchase from different persons and sale to different persons is ap .....

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of the assessee has not been demolished by the CIT and without bringing out any allegation that the purchase of property and sale of property was with different persons and entities, it cannot be held that the assessee had entered into property transaction with different persons/entities. Further, as we have already noted that the sale of property no. 783/161 was made to Shri Mahesh Mehta and purchase of property no. 56/7, DB Gupta Road was also made from M/s Honest Estates (P) Ltd. in which Mr. .....

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n unaccounted consideration in the statement of capital gain filed along with the return of income, then it further explains the source of unaccounted payment of consideration of purchase of property bearing no. 56/7, DG Gupta Road, hence, no addition pertaining to undisclosed investment could have been made. However, as a vigilant tax collecting authority, the AO adopted a conservative approach and deducted ₹ 1 crore from capital gain and taxed the same under the head of income from other .....

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t the order is erroneous as a condition precedent for exercise of jurisdiction us/ 263 of the Act. 26. From operative part of the order of the CIT at para 6 page 9, we note that the CIT has held that the assessment on the issues raised in the show cause notice was made without proper examination, inquiry and verification, therefore, revisional jurisdiction u/s 263 of the Act is warranted in a case where assessment has been made without inquiry or verification. In this para, the CIT contradicts h .....

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3 of the Act issued to the assessee, we note that the CIT has picked up six properties to substantiate this issue against the assessee. Ld. counsel of the assessee submitted that property listed at Sl. No. 2 to 6 are related to assessee s husband Shri Uday Kumar Vaish and the assessee has nothing to do with the capital gain and consideration arising therefrom. Ld. counsel further pointed out that as far as property at sl. No.1, 3, 4 & 5 are concerned, assessee was holding these properties jo .....

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to the above, ld. DR submitted that mere query and reply of the assessee are not sufficient to meet the requirement of proper verification and examination of the details filed by the assessee along with return of income and merely because some details have been filed along with return of income and some queries were raised by the AO which do not amount to an adequate and proper examination of the issue. Ld. DR pointed out that there was an understatement of consideration pertaining to property .....

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ch was recorded during the survey u/s 133 of the Act and the AO very well examined all the relevant papers and documents pertaining to income of capital gain accruing to the assessee during the relevant period, therefore, the view taken by the AO was plausible and in accordance with law because despite deep inquiry during the assessment proceedings to the sale of other properties, there was no incriminating material or allegation against the assessee which could show the understatement of consid .....

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f the considered opinion that there was no requirement of any further examination and verification with regard to these properties. From para no. 3 of the impugned notice, we note that after placing table of properties, the CIT has simply mentioned that the AO has completed the assessment without making any inquiry or investigation on this issue, therefore, it is apparent that the assessment passed by the AO is erroneous and prejudicial to the interest of revenue. In view of documents placed by .....

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e note that the assessee declared sale consideration and capital gain in the statement filed along with her return of income. The AO properly considered understatement of consideration and capital gain accrued to the assessee after properly considering the statement of assessee s husband Shri Uday Kumar Vaish recorded u/s 133 of the Act. We are unable to see any other incriminating material or evidence which could establish the allegation of understatement of sale consideration and capital gain .....

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e CIT has remitted all three issues to the file of AO by holding that the AO has failed to conduct proper examination and verification on three issues. The CIT further held that in view of various judicial pronouncements, it has been held that where the inquiry or verification is warranted but not done, it would certainly cause prejudice to the revenue and the Commissioner shall be justified in remanding the matter back to the AO for making such inquiry. At this juncture, it would be appropriate .....

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ows:- 10. Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. Section 263 has been enacted to empower the CIT to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the Revenue. The expression prejudicial to the interest of the Revenue& .....

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. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word erroneous‟ includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on merits. - 16. Thus, in cases of wrong opinion .....

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e is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mand .....

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and the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. 17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In .....

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rder was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material .....

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in Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, (2000) 243 ITR 83 (SC), had observed that the phrase prejudicial to the interest of Revenue‟ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of Revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has re .....

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the interest of the Revenue. 32. In view of above, as per ratio laid down by Hon ble Jurisdictional High Court, it is amply clear that in the cases where there is inadequate inquiry but not lack of inquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if inquiry and verification is conducted by the CIT and he is able to establish and show the error and mistake made by the AO, making the order unsustainable in law. Their lordships further .....

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order is erroneous. In this judgement, it was further held that the distinction must be kept in mind by the CIT while exercising judgment under Section 263 of the Act and in absence of the finding that the order is erroneous and prejudicial to the interest of revenue, the exercise of jurisdiction under said section is not sustainable. The assessee has also held that the finding that the order is erroneous is the condition or requirement which must be satisfied for exercise of jurisdiction u/s 2 .....

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erroneous without CIT conducting verification/inquiry. It was also laid down that the CIT can direct reconsideration of assessment on this ground but only when the order is erroneous and an order of remit cannot be passed by the CIT to ask the AO to decide whether the order was erroneous and such order is not permissible under the provisions of section 263 of the Act. Finally, the bottomline of this judgment is that the jurisdictional pre-condition for invoking section 263 of the Act is that th .....

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nable and not in accordance with law. Per contra, from careful and logical analysis of the action of the AO, we observe that in regard to understatement of sale consideration received by the assessee and understatement of purchase consideration paid by the assessee, undisputedly both transactions were undertaken by the assessee and her husband jointly with Mr. Mahesh Mehta and his other group entities on the same date i.e. 17th July, 2008, hence, the share of ₹ 1 crore paid by the assessee .....

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er. The tax liability on capital gain attracts which was placed by the assessee along with her return of income available at page 10 of the paper book. The AO after consideration of capital gain statement accepted the amount of ₹ 1 crore as unaccounted consideration received by the assessee on sale of property and paid by the assessee on purchase of property on the very same date and the AO instead of taxing the capital gain taxed ₹ 1 crore under the head of income from other sources .....

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