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2017 (5) TMI 834

e course of assessment proceedings we observe that to a specific query raised during the assessment proceedings the assessee has given a specific reply which was accepted by the Ld.AO which resulted in fetching more Revenue to the income tax department because of applying the rate of land as on 01/04/1981 at ₹ 290 per sq.mt. as against ₹ 380 per sq.mt. originally shown by the assessee in the income tax return. - There was a sufficient enquiry about the impugned transaction to which complete details were filed by the assessee to the satisfaction of Ld.AO which resulted in enhancing the long term capital gain originally shown by the assessee. Ld.CITís order u/s.263 of the Act is focusing on conducting additional enquiry on different pattern and also to apply fair market value of the land as on 01/04/1999 and alternatively he has mentioned about the comparable price of gold in 1999 which was quite similar to the basis taken by the valuer in the revised valuation report of Mr.P.K.Desai dated 10/08/2011 submitted during the course of assessment proceedings. In such case, where there is adequate enquiry and observations of the Ld.AO are clearly mentioned in the body of a .....

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see accordingly offered the additional long term capital gain for tax and submitted revised computation of total income along with the differential tax payment. Ld.AO after examining the revised computation of income and copy of valuation report dated 10/08/2011, accordingly taxed long term capital gain of ₹ 25,46,017/- as against ₹ 12,57,226/- shown by the assessee in his original return of income. Income was assessed at ₹ 30,33,450/- 3.1 Subsequently Ld.CIT having jurisdiction over the assessee called for the assessment records of the assessee for A.Y. 2009-10. After examining the records Ld.CIT was of the view that Jantri rate was available as on 01/04/1999 of the impugned agriculture land. Ld.AO should have taken the basis of Jantri rate of ₹ 220 per sq.mt. as on 01/04/1999 and the cost indexation benefit should have been allowed accordingly. Accordingly Ld.CIT issued notice u/s.263 of the Act on 18/12/2013 are read as follows: It was found that the assessment order passed u/s 143(3) of the Act dated 29.09.2011 by the Assessing Officer, Asst. Commissioner of Income Tax, Circle-2(2), Baroda for A.Y. 2009-10 was erroneous in so far as it was prejudicial to .....

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as given to the assessee to attend on 04.02.2014. After further non-compliance opportunity was given to the assessee to attend on 20.02.2014. Thereafter on 25.02.2014 the A.R. of the assessee attended and furnished written submission for the case. The contents of the written submission are as under: "It appears from notice bearing No. BRD/CIT-I/HQ/263/VTJ/2Ois-i4, dated 18,12.2013 that the present proceedings have been initiated for the following item considered erroneous and prejudicial to the interest of revenue. For computation of capital gains on sale of land, Fair Market Value of Land (FMV) as on 01/04/1981determined by registered valuer at Rs. l9,36,300/- while according to the calculation in the notice it is ₹ 5,79,250/- It also appears that the above issue is based on Audit Objection raised by the Revenue Audit party. We may be permitted to submit on facts of the case and in view of direct decisions available on the subject, that the above matter does not warrant any action u/s 263. It seems full facts have not been placed before your honour. Kindly permit us to elaborate on the above point as below: (i) The assessee had sold an agricultural land bearing RS No. 1 .....

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mbly states that no action u/s 263 is warranted in his case. (a) Commissioner of Income Tax u. Amit Corporation [2012] 21 Taxman.com 64 (Guj.) It was held that when, during course of framing of assessment, Assessing Officer had access to all records of assessee, and after perusing said records, he framed assessment, said assessment could not be re-opened in exercise of revision power under section 263 for making further inquiries. (b) Commissioner of Income Tax v. ArvindJewellers [2002] 124 Taxman 615 (Guj.) It was held that since material was there on record and said material was considered by ITO and a particular view was taken mere fact that different view could be taken, should not have been basis for an action under section 263.The Commissioner was unjustified in arriving at a conclusion that order passed by ITO was erroneous and prejudicial to interest of revenue. Copies of orders in the above referred cases are enclosed, marked-as: Annexure-2 5. After going through the submission of assessee Ld.CIT inclined to held that order passed by the Ld.AO dated 29/09/2011 suffers from serious infirmities and error and prejudicial to the interest of Revenue. Ld.CIT accordingly set asid .....

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Registered Valuer's own methodology of -working of land value with reference to gold price is also flawed in so far as that he has taken reference point for the gold value as on 01-04-2006 on the ground that the Jantri rate was prescribed only from 01-04-2006. This is factually incorrect in so far as Jantri rate of land was available from 01-04-1999. So even if the methodology of registered Valuer is accepted the working of the long term capital gains on the same reasoning as given by the Registered Valuer is ₹ 48.09 lacs and not ₹ 25.46 lacs as worked out by the assessee. Keeping in view the above facts, it is hereby held that the order passed by the Assessing Officer suffers from serious infirmities and error which is also prejudicial to the interest of revenue. Accordingly the order is set aside to be framed afresh after working out capital gains in view of the above discussion and after bringing evidence on record as also giving assessee an opportunity of being heard. 6. Aggrieved assessee is now in appeal before the Tribunal. 7. Ld.Counsel for the assessee submitted that the appellant sold 50% share of agriculture land jointly held with his brother and 50% sha .....

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ment and possibility of a different viewpoint does not justify action under section 263. iv) It is finally submitted that there is also no merit in the order under section 263 which requires valuation based on Jantri value as on, a date which is 20 years after the relevant date and then adjusting it backwards to the extent of increase in value of gold. It is further submitted that the Jantri value is required to be considered only for Section 50C and cannot be adopted for other provisions of law. For this proposition, we rely on various judicial decisions to the effect that the jantri value adopted in case of seller cannot be used for assessment of purchaser to presume that he paid extra consideration. These decisions include the following: -ITO V. Optec Disc Manufacturing -11 DTR 2640- ITAT Chandigarh Bench -CIT V. Fitwell Logic System P. Ltd. 1 ITR 286-ITAT Delhi Bench -CIT V. Smt. Anshu Jain- 36 SOT 263- ITAT Jaipur Bench -CIT V. Smt. Shweta Bhuchar- 192 Taxman 67-Punjab and Haryana High Court. -CIT V. Chandni Bhuchar-323 ITR 510-Punjab and Haryana High Court -CIT V. Raj Kumar Bimla Devi -279 ITR 360-Allahabad High Court -ITO V. Harley Street Pharmaceutical Ltd.- 38 SOT 486-ITAT .....

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Assessee submitted the copy of valuation report to the Ld.AO along with the revised computation of income and tax payment challans of the additional income tax payable on increased amount of long term capital gain. Ld.AO accepted the submission of the assessee and framed the assessment order accordingly. Thereafter, Ld.CIT called for the assessment records within his power u/s.263 of the Act and after examining them took a stand that the Ld.AO should have taken the basis of Jantri rate of land in question as on 01/04/1999 wherein per sq.mt. of land stood at ₹ 220 per sq.mt. Ld.CIT was of the view that assessee should have calculated the index cost by taking the basis of rate as on 01/04/1999 and therefore Ld.AO order u/s.143(3) of the Act is erroneous and prejudicial to the interest of Revenue. 9.1 Now before moving further to examine as to whether Ld.CIT has correctly assumed power u/s.263 of the Act, we find it necessary to first go through the ratio laid down by the Hon ble Supreme Court in the case of Malabar Industrial Company 243 ITR 83 relating to justification/validity of power exercised by Ld.CIT u/s.263 of the Act wherein Hon ble Apex court as observe as follows: A .....

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ation of law. From going through the para 4 of the assessment order u/s.143(3) of the Act we observe that Ld.AO has specifically dealt with this transaction in detailed by mentioning the details of agriculture land in joint ownership, sales consideration, fair market value as on 01/04/1981 valuation report attached. Thereafter vide order sheet dated 02/08/2011 the authorized representative of assessee was asked to furnish the basis of valuation of land as on 01/04/1981 by the valuer, the quality of land and basis of reasonability of the adopting the rate for valuation purpose. In reply to this specific query assessee submitted letter dated 22/09/2011. The content of this letter are reproduce below: Apropos to the subject matter and reference and as per instructions and authority from our above referred valued client, most respectfully we submit as under: 1.Please find enclosed a Valuation Report dated 10.08.2011 in respect pf Agricultural land bearing RS No. 165 situated, at Gotri, Vadodara, The same is marked as Annexure1. 2. At the time of filing the return of Income, your assessee had offered tax on long term capital gain (LTCG) on sale of the said agricultural land on the basis .....

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F ₹ 11,99,350/- Long term capita! Gain. ₹ 25,46,017/- In view of the above, Long term capital gain is taxed at ₹ 25,46,017/- as against ₹ 13,57,2267- shown by the assessee. The assessee has voluntarily paid taxes also on the increased capital Gain. 11. From going through the above series of events occurred during the course of assessment proceedings we observe that to a specific query raised during the assessment proceedings the assessee has given a specific reply which was accepted by the Ld.AO which resulted in fetching more Revenue to the income tax department because of applying the rate of land as on 01/04/1981 at ₹ 290 per sq.mt. as against ₹ 380 per sq.mt. originally shown by the assessee in the income tax return. We further observe that the Jurisdictional High Court in case of CIT V/s Amit Corporation (supra) has held that during course of framing of assessment, Assessing Officer had access to all records of assessee, and after perusing said records, he framed assessment, said assessment could not be re-opened in exercise of revision power under section 263 for making further inquiries . 11.1 We further observe in jurisdictional High Cour .....

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13,557 sq. ft. The expenses works out to ₹ 299.41/- per sq. ft. An examination of these figures as reflected in the computation made above establishes that the development charges claimed by the assessee per sq. ft. is ₹ 251.11/- which is lower than ₹ 299.41/-accepted by the department for the assessment year 2007-08 while concluding the assessment under Section 143(3) of the Act. One mode of computation which we have examined, stated above at para. 14, works out to ₹ 296.68/- per sq. ft. The development charges of ₹ 251.11/- per sq. ft. claimed by the assessee is just and reasonable ate does not result in any loss to the revenue. Thus, the CIT invoking the provisions of Section 263 of the Act, is uncalled for as the order passed by the Assessing Officer is no way prejudicial to the interest of the revenue. The revenue has miserably failed to satisfy us that the valuation of the work-in-progress accepted by the Assessing Officer, is erroneous and prejudicial to the interest of the revenue. Yet another important aspect which is significant to notice is that the Assessing Officer, accepting the valuation of the work-in-progress of the assessee for the as .....

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equisite to exercise of jurisdiction by the CIT suo motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the Revenue. The CIT has to be satisfied of twin conditions, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. Is one of them is absent - if the order of the ITO is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue - recourse cannot be had to s. 263(1) of the Act. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the Revenue's is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is .....

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e have also noticed the amendment brought to Section 263 of the Act by Finance Act, 2015 with effect from 01.06.2015 by introducing an explanation which provides for invoking Section 263 even in cases where the order is passed by the Assessing Officer is without making inquiries or verifications but the same is not applicable to the case on hand. 23. For the foregoing reasons, the substantial questions of law raised in both the appeals are answered in favour of the assessee and against the revenue. Accordingly, the appeals stand dismissed. 13. Respectfully following the principles laid down by Hon ble Apex Court in Malabar Industrial Company (supra) judgment of Hon ble Jurisdictional High Court and Hon ble Karnataka High Court as discussed above and considering the totality of the facts as discussed above we are of the considered opinion that Ld.CIT has wrongly assumed the jurisdiction u/s.263 of the Act and impugned order u/s.263 of the Act deserves to be quashed. Because, assessment order was passed by the Ld.AO after taking into consideration all the details and conducting a proper inquiry. We are therefore of the view that assessment order u/s.143(3) of the Act dated 29/09/2011 .....

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