TMI Blog2015 (7) TMI 616X X X X Extracts X X X X X X X X Extracts X X X X ..... see 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 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 Act cannot make assessment order as erroneous and prejudicial to the interest of revenue, especially when the claim of the assessee regarding interest u/s 24(b) of the Act is accepted as genuine and no incorrectness or infirmity 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 notice issued to the assessee u/s 263 of the Act and in totality of the facts and allegations mentioned in the notice u/s 263 of the Act and in the impugned order passed u/s 263 of the Act, we note that the CIT simply alleged conclusion of the AO and held that the AO has failed to conduct proper inquiry and verification on the issues cited above and without holding any specific erroneousness and without any finding that the views taken by the AO on all three are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 recording satisfaction, proceedings u/s 153C of the Act were initiated and the notice u/s 153C of the Act was issued on 21.6.2011. In response to the same, the assessee had filed a letter stating that the assessee has already filed her return which may be treated as filed u/s 153C of the Act. The assessment u/s 143(3) r/w section 153C of the Act was completed on 28.12.2011 by the AO, Central Circle-3, New Delhi at the returned income of ₹ 1,48,26,520 which was declared in the original return filed 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 assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nscious decision which can not be said to be erroneous merely because Ld. CIT holds otherwise in view of umpteen number of judicial decisions including 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 enquiry and show that assessment order was erroneous-Revising authority has no power to remand and direct Assessing Officer to conduct enquiry-income-tax Act, 1961, s. 263 -DIT vs. Jyoti Foundation 357 ITR 388 (Delhi) Lack of proper enquiry-in cases where there is inadequate enquiry by the AO and not lack of enquiry, CIT must give and record a finding that the order / enquiry made is erroneous before passing an order under s. 263-Matter cannot be remitted for a fresh decision to the AO to conduct further enquiries without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of assessment proceeding again submitting about the claim of the interest of housing loan. PB 158 is the copy of HDFC bank statement showing the amount of interest. 2) On the issue of ₹ 2 Crores as alleged unaccounted payment PB 183-187 is the copy of assessment order passed u/s 143(3) I 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 was applied and a conscious decision was taken and capital gain income was brought to tax and so much so nature of part of the capital gain was changed from capital gain to income 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 by the assessee's husband wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itting about the adjustment of ₹ 2 Crore made by Mr. Mehta. PB 181-182 is the copy of order sheet entries 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 from capital gain to income from other sources. PB 6-10 is the copy of computation of income, acknowledgment of return for A.Y. 2009-10, in which the assessee has shown calculation of capital gain on the sale of Property No. 7821161, DB Gupta Road, New Delhi 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 all bank accounts of the assessee, details of all properties and investment made, utilization of money. PB 15- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity i.e. Additional Commissioner in terms of section 153D and therefore in view of the following judicial decisions, jurisdiction could not be assumed u/s 263 Goyal Iron Steel Works (India) vs. Commissioner of Income Tax* (2002) 76 TTJ(Agra) 578 Mehta Cut Piece Cloth House vs. Income Tax Officer (1985) 23 TT J (CHD) 211 Income Tax Officer vs. Arora Alloys Ltd. (2011) 12 ITR (Trib) 263 (Chd) 8. Ld. counsel of the assessee during argument before us reiterated and elaborated the above written submissions and submitted that the issue of 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. 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 deduction u/s 24 of the Act from the income from house property. Ld. couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, details of all properties 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 payment of interest on housing loan. Ld. counsel finally submitted that the issue of transaction of ₹ 2 crore was properly considered and adjudicated by the AO as per facts and circumstances of the case after due application of mind and proper appreciation of the submission and evidence of the assessee in this regard. 10. In respect of last issue of sale consideration of other properties, ld. counsel of the assessee has further drawn our attention towards relevant pages of paper book of the 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional High Court of Delhi in the case of Duggal Co. vs CIT (1996) 220 ITR 456 (Del), the CIT(A) was competent to exercise his power u/s 263 of the Act where the ITO/AO while allowing deduction for interest and on other issues omitted to inquire into the matter in a proper way. 12. Ld. DR has also drawn our attention towards operative para 5.1 to 7 of the impugned order and submitted that from the discussion therein, it is clear 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 inquiry. Ld. DR parted with the argument with a final submission that the AO would allow the assessee to explain his stand on all three issues during reassessment proceedings in pursuance to order u/s 263 of the Act and therefore, no prejudice would be caused to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying 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 vehemently contended that the AO in fact has not given relief of special rate of income tax on long term capital gain and taxed the same amount at maximum rate of tax and shifted ₹ 1 crore to income from other sources instead of income from capital gain which attracts higher rate of tax and this action of the AO cannot be held as erroneous and prejudicial to the interest of revenue. Ld. counsel vehemently contended that how a particular additional income declared by the assessee during survey 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issuance of notice under this provision. Ld. counsel reiterated its reply to the notice u/s 263 of the Act and parted with the argument with a last submission that the assessee offered an amount of ₹ 1,40,00,057 under the head of capital gain 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 perusal of relevant material placed before us, at the outset, we find it appropriate to deal with legal contention of the assessee that the impugned assessment order was passed by the AO with prior approval of higher authority i.e. Addl. Commissioner in terms of section 153D of the Act and therefore in view of various judicial pronouncements and judgments, jurisdiction u/s 263 of the Act cannot be validly assumed and invoked by the CIT. To support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 interest payable may be substantiated by way of furnishing a normal certificate, statement of loan account and other supportive evidence or details pertinent to payment of interest which was claimed as deduction u/s 24(b) of the Act. In the present case, the assessee furnished all required detail before the AO during assessment proceedings along with reply dated 2.12.2011 and 5.12.2011. From a reply dated 5.12.2011 we note that in para 1, the assessee has mentioned details of claim of interest and 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 required certificate as per third proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his wife Smt. Maya Gupta from M/s Honest Estates Pvt. Ltd. against ₹ 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 crore shared by the assessee's husband), the source of which was not enquired examined. 2.2.2 The assessee has furnished a statement of short term Capital Gain/ Long Term Capital Gain and accordingly arrived at a total Capital Gain of ₹ 1,40,00,057/- and offered unaccounted transaction of ₹ 1 crore as part of income under Capital Gain. The AO neither rejected the assessee's capital gain shown at ₹ 1,40,00,057/- nor he made a recomputation of the capital gain showing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the questionnaire and notice dated 30.6.11, the assessee submitted copies of bank account, statement of assets and liabilities and a detailed note on the properties purchased by the assessee and property sold during the period under consideration. In assessee s paper book page 17 to 73, we observe that the assessee jointly purchased property no. 56/7, DB Gupta Road, with her spouse from M/s Honest Estates Pvt. Ltd. wherein three separate sale deeds have been executed in favour 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. Mahesh Mehta by getting registered sale deed in his favour on the same date i.e. 17.7.2008. 24. If we further analyse this issue, then we observe that as per statement of assessee s husband Shri Uday Kumar Vaish recorded u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Mahesh Mehta is a director representative of the transaction, then in totality of the facts and circumstances, especially when the sale deeds of both the transactions are registered and executed on the same date i.e. 17.7.2011, then the half share of sale consideration received by the assessee amounting to ₹ 1 crore attracts capital gain which has been offered by the assessee in the statement of long term capital gain as discussed above. We further observe that while the assessee has shown 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the CIT did not peruse the statements and calculation of income filed by the assessee along with her husband and the CIT has ignored statement of capital gain filed by the assessee at the time of framing impugned notice u/s 263 of the Act as well as impugned order. 28. Replying 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 at 783/161, DB Gupta Road sold to Mr. Mahesh Mehta and the AO did not consider the issue of understatement of consideration and capital gain in regard to property no. 783/160 and 783/162, therefore, the action of the CIT was quite justified and correct. Replying to the above, ld. counsel of the assessee pointed out that there was no incriminating material against the assessee regarding understatement of sale cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33 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 on other properties. Per contra, from the assessment order, we note that the AO took a favourable view to the revenue by placing ₹ 1 crore under the head of income from other sources instead of income from capital gains as declared by the assessee. Without making any deliberation on the merit of this action of the AO, we are of the view that decision taken by the AO cannot be held as unsustainable or not in accordance with law. 30. From operative part of the impugned order, we note that the 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 to consider the ratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there 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 mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition orrequirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o him, and this has resulted in loss to Revenue; or two views were possible and the Assessing Officer has taken one view with which the CIT may not agree; the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to 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 made it clear that 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 justif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gical 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 towards unaccounted purchase price of property no. 56/7, DB Gupta Road, the source of said investment is self speaking and explained when the revenue authorities have noted that the assessee had received unaccounted consideration of ₹ 1 crore on sale of property to Mr. Mahesh Mehta on the very same date. In this situation, the addition on account of unexplained investment could not be made and income of capital gain accrued to the assessee by way of unaccounted consideration received by her. 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 considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
