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2016 (3) TMI 1116 - ITAT AMRITSAR

2016 (3) TMI 1116 - ITAT AMRITSAR - TMI - Validity of assessment order passed ex-parte - scrutiny of cases selected on the basis of information received through AIR - unexplained cash deposits - Held that:- As seen, the AIR information in the present case 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 .....

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Kaur, with whom the assessee had entered into a separate agreement to sell and from whom, the assessee had received a sum of ₹ 3 lakhs at the time of agreement “for their examination in order to ascertain whether the agreement, was finalized or cancelled”. The AO observed that this proceedings was limited to the extent of the AIR information. - Evidently, the matter of the other agreement to sell does not stand covered in the AIR information, which was regarding the cash deposits of &# .....

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purchased did not have any relation to the house sold and thus, the assessee had wrongly claimed exemption under section 54 of the Act. The AO made addition of ₹ 11,92,000/- in the calculation of the assessee’s long term capital gains.This, again, does not come within the AIR information, which is, to reiterate, with regard to the cash deposits of ₹ 25 lakhs. - So, these latter enquiries by the AO are not aspects of the information received through AIR. The only aspect of such in .....

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e additional enquiries would have been to take approval from the administrative Commissioner to widen the scrutiny. This, however, was not done and therefore, the action of the AO is violative of the CBDT Instruction. - Apropos 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 observ .....

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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 and in asking the assessee to produce Smt. Balbir Kaur and Smt. Kamaljit Kaur, the executants of the other agreement to sell which had nothing to do with the cash deposits. Moreover, it cannot, in view of the above discussion, at all be said that the objections raised by the assessee were merely to divert the attention of the AO t .....

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of assessee - ITA No. 87(Asr)/2016 - Dated:- 24-3-2016 - SH. A.D. JAIN, JUDICIAL MEMBER Appellant by: Sh. J.S. Bhasin, Advocate Respondent by: Sh. 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), Jalandhar. The assessee has raised the following grounds of appeal: 1. That ld. CIT(A) has grossly erred in rejecting the assessee s contention that the ITO had violated the CBDT Instructions dated 08.09.2 .....

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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. CIT(A) was not justified in disbelieving the compromise deal reached with the first party, as an afterthought. 5. That likewise, the ld. CIT(A) also erred in confirming the denial of exemption under section 54 to the .....

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wed 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 assessee was asked to produce documents, accounts and any other evidence on which the assessee might rely in support of the return filed by her. The said notice is marked AIR Only . 3. Thereafter, the AO issued to the assessee, a notice ( .....

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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 telephones installed at your residence as well as on business premises with details of expenses on telephones. 7. Details of bank accounts in your name, in the name of your husband and children in the following proforma:- Sl.No. Name of address the bank .....

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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 was seeking information with evidence on various issues not covered by the AIR information, though the first notice dated 21.09.2012 was marked AIR Only , whereas as per CBDT Guidelines/Instruction bearing F.No.226/26/2006-ITA.11(Pt.) (APB-15) dated 08.09. .....

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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) to 18]. 6. In the assessment order, the AO observed as follows: 3.1 The assessee has declared the capital gain of ₹ 18,30,652/-vhich was claimed exempted u/s 54 of the Income Tax Act, 1961.The assessee purchased a plot for ₹ 11,92,500/- plus stamp duty of ₹ .....

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e assessee also received ₹ 3,00,000/- at the1 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 registration deed and the date fixed for registration was fixed 05.10.2010. The assessee vide this office letter dated 13.12.2013 was requested to produce Suit. Balbir Kaur W/o Sh. Balwinder Singh and Smt. Kamajit Kaur W/o Sh. Lakhwinder for examination. The counsel of the assessee vide letter dated 27.12.2 .....

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ith 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 exemption is only allowable for purchasing or constructing a residential house and not for purchase a plot. Since the plot does not qualify for exemption u/s 54 of the Income Tax Act, 1961, the claim of the assessee for purchase of plot for ₹ 11,92,000/- is rejected. I hereby make the addition of ₹ .....

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t 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 cancelled, since the assessee has failed to clarify this aspect. Thus in the absence of asscssee s compliance to produce the vendees of the agreement, it is presumed that this agreement could not gain finality, because the same property was sold by the assessee to somebody else by way of sale deed dated 07. .....

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5.03.2009. 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 improvement as 8,69,840/- Total cost of acquisition. 13,94,348/- Balance. 21,30,652/- Less Deposit in the Capital Gain Scheme 6,50,000/- Balance Taxable Capital Gain 14,80,652/- 8. The AO refused to grant benefit of section 54 of the I.T. Act, 1961. 9. The ld. CIT(A) upheld the assessment, holding as follows: 5.2. I have car .....

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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 also duty bound to see whether the assessee has correctly declared taxable value of the long term capital gains from the sale of her residential house while filing the return of income. In my further opinion, the AO has done nothing wrong in the case of the assessee as he has computed the long term capital gains as per provi .....

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gether 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 by the assessee are dismissed. 10. The ld. counsel for the assessee has contended that the ld. CIT(A) has grossly erred in rejecting the assessee s contention that the AO had violated the CBDT instructions dated 08.09.2010 governing AIR cases, while passing the impugned assessment ex-parte, without first meeting the objec .....

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O 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 assessee and it is further a logical conclusion, that as correctly observed by the ld. CIT(A), the AO was duty bound to see as to whether the assessee has correctly declared taxable value of the long term capital gains from the sale of her residential house; that the long term capital gain was correctly computed by the AO in accordance .....

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ructions, 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) of the Act reads as follows: The Board may, from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instruction .....

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. 16. Thus, evidently, the Income Tax Authorities are bound to observe and follow the instructions of the Board. The operative word in section 119(1) is shall . Judicial decisions have recognized this position. 17. In the present case, the assessee s case was picked up for scrutiny on the basis of AIR information. The notice dated 21.09.2012 (supra) was a stamped with AIR Only , in compliance with para 3 of the CBDT instruction (supra) dated 08.09.2010. 18. The CBDT Instruction dated 08.09.2010, .....

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ding scope of enquiry in the scrutiny cases selected only on the basis of information received through the AIR returns. 2. The above mentioned guidelines have been reconsidered by the Board and it has been decided that the scrutiny of such cases would be limited only to the aspects of information received through AIR. However, a case may be taken up for wider scrutiny with the approval of the administrative Commissioner, where it is felt that apart from the AIR information there is a potential e .....

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s dated 31.3.2011 (Entry No.2 in the table is, as stated, merely a repetition of Entry No.1). According to para-3 of the assessment order, the details of this are deposits of ₹ 9.5 lakhs on 07.05.2010, ₹ 9.5 lakhs on 08.05.2010 and ₹ 6 lakhs in cash by the assessee in her savings bank account with OBC, Jalandhar. 20. Para 2 of the CBDT Instruction states that the scrutiny of cases selected on the basis of information received through AIR returns would be limited only to the asp .....

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concerned sale deed. 22. Now, as per the CBDT Instruction, nothing further was to be gone into by the AO, since the information received through AIR was the cash deposits. However, the AO as noted in paras 3.1 & 3.3 of the assessment order itself asked the assessee vide letter dated 13.12.2013 to produce Smt. Balbir Kaur and Smt. Kamaljit Kaur, with whom the assessee had entered into a separate agreement to sell and from whom, the assessee had received a sum of ₹ 3 lakhs at the time o .....

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mt. Balbir Kaur and Smt. Kamaljit Kaur, or to make addition of ₹ 3 lakhs, as was done. 24. The assessee, as per para 3.1 of the assessment order, had purchased a plot for ₹ 11,92,500/- plus stamp duty of ₹ 83,475/- on 28.07.2009. Since the assessee did not produce the two ladies for examination, the AO held that the plot purchased did not have any relation to the house sold and thus, the assessee had wrongly claimed exemption under section 54 of the Act. The AO made addition of .....

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rutiny. Now, para 2 of CBDT Instruction is specific when it states that where it is felt that apart from the AIR information, there is potential escapement of income more than ₹ 10 lakhs, the case may be taken up for wider scrutiny with the approval of the administrative Commissioner. 28. So, the proper course for the AO before making these additional enquiries would have been to take approval from the administrative Commissioner to widen the scrutiny. This, however, was not done and there .....

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