TMI Blog2017 (3) TMI 1172X X X X Extracts X X X X X X X X Extracts X X X X ..... or not seen by the AO. In view of this, the CIT by invoking the provisions of the section 263 of the Act, directed the AO to examine the issue raised by him in his order afresh and decide in accordance with law. In this finding of the CIT, we do not find any infirmity and he action of Ld. CIT is confirmed. Hence, the AO would examine the issue raised by the Ld. CIT in his order u/s.263 and decide the issue in accordance with law. - Decided against assessee - I.T.A.No.112/Mds/2016 - - - Dated:- 17-2-2017 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND Shri Duvvuru RL Reddy, JUDICIAL MEMBER For The Appellant : Shri R.Sivaraman,Advocate For The Respondent : Shri Jairam Raipura, CIT DR ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal of the assessee is directed against the order of the Principal Commissioner of Income-tax, Chennai, dated 27.11.2015 in C.No.6119(14)/PR CIT-6/2014-15 passed u/s 263 of the Income-tax Act, 1961, for assessment year 2011-12. 2. The assessee has raised the following grounds for our adjudication. 1. The order of the Principal Commissioner of Income Tax (PCIT) dated 27.11.2015 for the assessment year 2011-12 is erroneo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case are that the assessee is an individual, deriving income from Investment in Shares and Mutual Funds. For assessment year under consideration, the assessee had returned an income of ₹ 6,00,47,572/-. The income return from the long term capital gains was ₹ 5.80 crores whereas the income from other sources was reflected at ₹ 20.15 lakhs. On examination of records, it was noticed by the CIT that during the year under consideration, the assessee had sold in the capacity of an Indian Resident, total number of 4,25,117 shares of Tutor Global Private Ltd.,(Company) to a nonresident M/s.Pearson (Singapore) Pvt Ltd. at a price of ₹ 372.20 per share during financial year 2010-11 and total value of ₹ 15.76 crores. The assessee claimed deduction of ₹ 9.96 crores u/s.54F of the Act on the ground that an amount of ₹ 10 crores out of long term capital gains was deposited in the Capital Gain Account Scheme with the Bank of Maharashtra and UCO Bank before the due date of filing the return. It was further noticed that he had spent a sum of ₹ 7.31 crores out of this capital gains account towards purchase of land at Muthukadu and the construction wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Panchayat on or before the Due date. According to ld. CIT, the land purchased was agricultural land and the asessee was not aware whether the Muthukadu Panachayat had given approval for construction of a residential house on this agricultural. Further, Ld. CIT observed that these facts narrated above do not pertain to the assessment year in question and the allowable deduction u/s54F of the Act will pertain to the AY 2015-16. Therefore,the AO is directed to examine this point in the relevant assessment year as to whether the eligibility for the claim uls 54F of the Act is disqualified on the ground that the residential property was not completed before the due date and take necessary remedial measures on this count. 3.2 Further, ld. CIT observed that the AO had failed to apply his mind and cause necessary verification and an enquiry with respect of the value of sale consideration of the shares as per the RBI Notification, whether the amount deposited in the Bank of Maharashtra was transacted in accordance with the capital gains scheme of the Central Government. According to CIT, the Sale process did not follow the SEBI Guidelines in force and copies of Agreements entered into we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouse within the fixed period of three years, from the date of transfer of the original capital asset, the exemption u/s.54F to be given and capital gains had to be charged in the previous year after the expiry of three years from the date of transfer of capital asset. For this purpose, he relied on the order of Visakhapatnam Tribunal in the case of Vegesina Kamala Vs. ITO (157 ITD 457)( Visakhapatnam). He also relied on the judgement of Delhi High Court in the case of CIT Vs. Sunbeam Auto Ltd. reported in [2011] 332 ITR 167(Delhi) . 4.1 In our opinion, the order passed by the AO in this case is very cryptic. The AO being a quasi judicial authority cannot take a view, either against or in favour of assessee /Revenue, without making proper enquiry and without proper examination of the claim made by the assessee in the light of facts on record. The Commissioner has empowered to initiate the suo moto proceedings u/s.263 of the Act either when the AO takes a wrong decision without considering the material available on record or he takes a decision without making an enquiry into matter where such enquiry was prima facie warranted. In our opinion, arbitrariness in decision making would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a peculiarly gross or awkward kind, committed through glaring ignorance, heedlessness, or awkwardness. An error may be overlooked or atoned for, a mistake may be rectified, but the shame or ridicule which is occasioned by a blunder, who can counteract. Strictly speaking, Hallucination is an illusion of the perception, a phantasm of the imagination. The one comes of disordered vision, the other of discarded imagination. It is extended in medical science to matters of sensation, whether there is no corresponding cause to produce it. In its ordinary use it denotes an unaccountable error in judgement or fact, especially in one remarkable otherwise for accurate information and right decision. It is exceptional error or mistake in those otherwise not likely to be deceived. 4.3 In order to ascertain whether an order sought to be revised under Section 263 is erroneous, it should be seen whether it suffers from any of the aforesaid forms of error. In our view, an order sought to be revised under Section 263 would be erroneous and fall in the aforesaid category of errors if it is, inter alia, based on an incorrect assumption of facts or an incorrect application of law or nonapplicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the sense that he is not subjected to any amount of tax in excess of what is legitimately due from him, and on the other hand, he has a duty to protect the interests of the revenue and to see that no one dodged the revenue and escaped without paying the legitimate tax. The Assessing Officer is not expected to put blinkers on his eyes and mechanically accept what the assessee claims before him. It is his duty to ascertain the truth of the facts stated and the genuineness of the claims made in the return when the circumstances of the case are such as to provoke inquiry. Arbitrariness in either accepting or rejecting the claim has no place. The order passed by the Assessing Officer becomes erroneous because an enquiry has not been made or genuineness of the claim has not been examined where the inquiries ought to have been made and the genuineness of the claim ought to have been examined and not because there is anything wrong with his order if all the facts stated or claim made therein are assumed to be correct. The Commissioner may consider an order of the Assessing Officer to be erroneous not only when it contains some apparent error of reasoning or of law or of fact on the face ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the revenue and the taxpayer and he has to be fair to both. His duty to act fairly requires that when he enquires into a substantial matter like the present one, he must record a finding on the relevant issue giving, howsoever briefly, his reasons therefor. In S.N. Mukherjee v. Union of India AIR 1990 SC 1984, it has been observed by the Hon'ble Supreme Court as follows: Reasons, when recorded by an administrative authority in an order passed by it while exercising quasi-judicial functions, would no doubt facilitate the exercise of its jurisdiction by the appellate or supervisory authority. But the other considerations, referred to above, which have also weighed with this Court in holding that an administrative authority must record reasons for its decision are of no less significance. These considerations show that the recording of reasons by an administrative authority serves a salutary purpose, namely, it excludes chances or arbitrariness and ensures a degree of fairness in the process of decision-making. The said purpose would apply equally to all decisions and its application cannot be confined to decisions which are subject to appeal, revision or judicial re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive finding in his favour, though he may have sufficiently established his case. 5. In view of the foregoing, it can safely be said that an order passed by the Assessing Officer becomes erroneous and prejudicial to the interests of the Revenue under Section 263 in the following cases: (i) The order sought to be revised contains error of reasoning or of law or of fact on the face of it. (ii) The order sought to be revised proceeds on incorrect assumption of facts or incorrect application of law. In the same category fall orders passed without applying the principles of natural justice or without application of mind. (iii) The order passed by the Assessing Officer is a stereotype order which simply accepts what the assessee has stated in his return or where he fails to make the requisite enquiries or examine the genuineness of the claim which is called for in the circumstances of the case and assume jurisdiction u/s.263 by the CIT is justified. 6. Now, coming to the facts of the present case, the claim of assessee regarding the consideration received on sale of shares was accepted by the AO. The AO neither enquired nor applied his mind to the notification applicability ..... X X X X Extracts X X X X X X X X Extracts X X X X
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