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2016 (4) TMI 909 - ITAT AMRITSAR

2016 (4) TMI 909 - ITAT AMRITSAR - TMI - Applicability of CBDT Instruction F.No.225/26/2006-ITA-II(Pt.) dated 08.09.2010 on A0 - ex-parte order - AO while computing capital gain and denying benefit of section 54 to the assessee, has contravened the said instructions, thereby rendering the assessment order invalid? - Held that:- The proper course for the AO before making the additional enquiries would have been to take approval from the administrative Commissioner to widen the scrutiny. This, how .....

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f the long term capital gains from the sale of her residential house. However, as noted, in a case like the present one, where it has been picked up for scrutiny on the basis of the AIR information, the CBDT Instruction has to be strictly abided by. Herein, since the AIR information was only with regard to cash deposits of ₹ 25 lakhs and the assessee had duly and adequately explained the source thereof, the AO, it cannot be gainsaid, transgressed his competency in issuing the further query .....

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CBDT Instruction.

It is held that since the assessment order, passed ex-parte by the AO, was in violation of specific CBDT Instruction, the same is not legally sustainable. - Decided in favour of assessee - ITA No. 87(Asr)/2016 - Dated:- 24-3-2016 - A. D. Jain, JM For the Appellant : J. S. Bhasin, Adv For the Respondent : Shri Tarsem Lal, DR ORDER This is the assessee's appeal for the assessment year 2011-12, against the order, dated 12.01.2016, passed by the ld. CIT(A), Jalandha .....

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f CBDT instructions dated 08.09.2010 nor of natural justice and that were the objections taken by assessee just to divert the attention of the AO to come to a logical conclusion. 3. That without prejudice to above legal grounds, the ld. CIT(A) further erred in sustaining the addition of ₹ 3,00,000/-, as made by the ITO by treating the 'biana' received against first sale deal of property, to have been forfeited. 4. That while confirming the above addition of ₹ 3 lacs, the ld. .....

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ions raised by assessee. 7. That the assessee having been put to undue harassment of the authorities below, by taking arbitrary stands contrary to binding CBDT instructions and also the judicial precedents, she seeks to be allowed appropriate cost in the matter." 2. The facts are that the AO issued a notice (APB-8) dated 21.09.2012 to the assessee, seeking information in connection with the return of income submitted by the assessee on 17.10.2011, for the year under consideration. The asses .....

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you are requested to file the following information, details and evidence in support to your claim: 1. Nature of business. 2. Statement of liabilities and assets as on 01.04.2010 to 31.03.2011. 3. History of the family with complete details of month wise withdrawal for household expenses in your name and in the name of your wife/Husband and family members. 4. Details of education expenses of your children. 5. Electricity meter no. alongwith details of expenses on electricity. 6. Details of tele .....

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gwith its enclosures. 10. Details of properties sold /purchased (including agreements if any made but not matured) during the year under consideration. Submit the copy of agreement/registered deeds. 11. As per information available in this office you have made cash deposits of ₹ 50,00,000/- in your saving bank account. Please furnish the source of cash deposit along with evidence." 4. Vide reply (APB 11-12) dated 21.08.2013, the assessee stated that the questionnaire dated 15.07.2013 .....

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er), regarding the source of the alleged cash deposit of ₹ 25 lakhs in the assessee's savings bank account with O.B.C, the assessee stated that she had sold her residential house for ₹ 32.25 lakhs on 15.05.2010 and the proceeds thereof, i.e., ₹ 7 lakhs received by cheque and ₹ 25.25 lakhs by cash were deposited in her savings bank account with O.B.C. In support, she filed a copy of the sale deed (APB 13-14) and a copy of her saving bank account with OBC [APB 17 (back) .....

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other agreement to sell the same property (House No. 13 /2 situated in area o, Green Mode! Town) to Smt. Balbir Kaur W/o Sh. Balwinder Singh R/o 11 .No. 359- 13, St. No.13 , Jaswant Nagar, Jalandhar and Smt. Kamaljit Kaur W/ o Sh. Lakhwinder Singh R/ o 11. No. 76 Golden Avenue, Jalandhar. The assessee also received ₹ 3,00,000 /- at the 1 lime of agreement and ₹ 9,00 ,000/- had to be received by 15. 07. 2009, as advance. The balance amount had to be received at the lime of registratio .....

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ed through AIR. The present proceedings limited to extent of AIR information. 3.2. Keeping in view the above reply of the assessee, it is clear that the assessee is not ready to furnish the requisite information. Thus it is evident that the plot purchased in the earlier year does not have not any relation with the residential house sold during the Financial Year 2010-11, and the exemption claimed u/s 54 of the Income Tax Act, 1961, amounting to ₹ 11,92,500 has wrongly been claimed, as exem .....

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ar with Smt. Balbir Kaur W/o Sh. Balwinder Singh R/o H. No. 359-B, St. No.13, Jaswant Nagar, Jalandhar and Smt. Kamaljit Kaur W/o Sh. Lakhwinder Singh R/o H. No. 76 Golden Avenue, Jalandhar on 15.03.209. The copy of agreement is placed on record. As per this agreement the assessee had received initial amount of ₹ 3 lacs on 15.03.2009. The assessee was called upon to produce the vendees-of the said agreement for their examination in order to ascertain whether the agreement was finalized or .....

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ssee's total receipt/sale consideration of the property in question as per the provisions of section 51 of the Income Tax Act, 1961." 7. The AO thus computed long term capital gain as follows: Sale consideration as per registered deed dated 07.05.2010. 32,25,000/- Add forfeited Biana as per Agreement dated 15.03.2009. 3,00,000/- Total sale consideration of the property to compute the capital gain. 35,25,000/- Less cost of acquisition of property. 5,24,508/- Less Indexed cost of improvem .....

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nts relied upon by the assessee in connection with the issue under reference. In my opinion, the AO has not violated the instructions issued by the CBDT governing AIR cases in any way as he has limited his enquiries to the source of cash deposits in the bank account of the assessee and further logical conclusion. I am also of the opinion that although the cash deposits in the bank account of the assessee were found to be explained with the help of sale proceeds of house property but the AO is al .....

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conclusion. Moreover, the assessee should not have any grudge as the AO framed the assessment as per provisions of law after allowing proper opportunity of being heard and restricting his enquiries to the issue under reference. I am also of the opinion that the judicial pronouncements relied upon by the assessee have altogether different facts from the facts of the case of the assessee and have no application in the case of the assessee. In the result, the grounds No. 1, 2 and 3 of appeal taken .....

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as neither in violation of the CBDT instructions dated 08.09.2010, nor of natural justice and that the objections taken by the assessee were just to divert the attention of the AO to come to a logical conclusion. 11. The ld. DR, on the other hand, strongly relied on the impugned order. 12. It has been contended that evidently, the AO has not violated the CBDT instructions governing AIR cases, since he has limited his enquiries to the source of cash deposits in the in the bank account of the asse .....

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attention of the AO to arrive at a logical conclusion. 13. The question is whether, firstly, the AO is bound by the CBDT Instruction F.No.225/26/2006-ITA-II(Pt.) dated 08.09.2010 and as to whether in the present case, while computing capital gain and denying benefit of section 54 to the assessee, the AO has contravened the said instructions, thereby rendering the assessment order invalid; and secondly, as to whether the ld. CIT(A) is correct in upholding the assessment order. 14. Section 119(1) .....

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instructions, the same have to be followed in letter and spirit by the AO. 14. In 'Amal Kumar Ghosh vs. Addl. CIT', 361 ITR 458 (Cal.), it has been held that when the department has set down a standard for itself, the department is bound by that standard and it cannot act with discrimination. 15. No decision contrary to the above decisions has been filed. 16. Thus, evidently, the Income Tax Authorities are bound to observe and follow the instructions of the Board. The operative word in s .....

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rtment of Revenue Central Board of Direct Taxes, New Delhi, dated the 8th September, 2010 To All Chief Commissioners of Income Tax, All Directors General of Income Tax, Sir/Madam, Subject: Selection of cases for scrutiny on the basis of data in AIR returns and subsequent assessment proceedings-regarding. Reference is invited to Board's letter of even number dated 23 rd May, 2007 regarding scope of enquiry in the scrutiny cases selected only on the basis of information received through the AI .....

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cked for scrutiny only on the basis of AIR information, the notice u/s 143(2) of Income Tax Act 1961 should clearly be stamped with "AIR Case". This should be immediately brought to the notice of all the officers working in your region. Yours faithfully, (Ajay Goyal) Director (ITA.II)" 19. As per the table at page-1 of the AO, the AIR information was regarding transaction of ₹ 25 lakhs dated 31.3.2011 (Entry No.2 in the table is, as stated, merely a repetition of Entry No.1) .....

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se was regarding cash deposits of ₹ 25 lakhs by the assessee in her savings bank account with OBC. Meaning thereby, that the assessee was required to explain the source of such cash deposits. The assessee explained the same as sale proceeds of her residential house amounting to ₹ 32.25 lakhs received from Smt. Naunihal Kaur, the purchaser. Her this assertion was duly supported by a copy of the concerned sale deed. 22. Now, as per the CBDT Instruction, nothing further was to be gone i .....

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alized or cancelled". The AO observed that this proceedings was limited to the extent of the AIR information. 23. Evidently, the matter of the other agreement to sell does not stand covered in the AIR information, which was regarding the cash deposits of ₹ 25 lakhs, which the assessee had adequately explained, as above. So, it was obviously not within the purview of the AO to ask the assessee to produce Smt. Balbir Kaur and Smt. Kamaljit Kaur, or to make addition of ₹ 3 lakhs, a .....

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ains. 25. This, again, does not come within the AIR information, which is, to reiterate, with regard to the cash deposits of ₹ 25 lakhs. 26. So, these latter enquiries by the AO are not aspects of the information received through AIR. The only aspect of such information was the source of the cash deposits, which stands adequately explained by the assessee, as above. 27. In fact, what the AO did was to widen the scrutiny. Now, para 2 of CBDT Instruction is specific when it states that where .....

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the ld. CIT(A)'s order, obviously the ld. CIT(A) has erred in confirming the assessment order. The ld. CIT(A) had erred in view of the above observation of the Bench, in holding that the AO has not violated the CBDT Instruction. The ld. CIT(A) has gone wrong in observing that the AO has limited his enquiries to the source of cash deposits. True, the AO is duty bound to see whether the assessee has correctly declared taxable value of the long term capital gains from the sale of her residentia .....

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