TMI Blog2017 (11) TMI 1061X X X X Extracts X X X X X X X X Extracts X X X X ..... the provision could not be invoked and the same would be contrary to the provisions of law, if so invoked. It is our considered opinion that the Ld. Pr. CIT does not have the power to direct the AO to do something which the Act itself does not permit. The invocation of jurisdiction under section 263 of the Act loses its validity on this count also. Accordingly, we hold that the Commissioner of Income Tax had no jurisdiction or power to invoke provisions of section 263 of the Act on the facts and circumstances of the case and we deem it fit to quash the order passed under section 263 of the Act. Appeal of the assessee is allowed. - ITA No. 2648/Del/2016 - - - Dated:- 1-11-2017 - SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Appellant : Shri Ajay Vohra, Sr. Adv., Gaurav Jain, Adv. For The Respondent : Smt. Pramita Tripathy, CIT DR ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER This appeal has been preferred by the assessee against order dated 01/03/2016 passed under section 263 of the Income Tax Act, 1961 (hereinafter called the Act ) passed by the Ld. Principal Commissioner of Income Tax 7, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-application of the provisions of section 40A(3) of the Income Tax Act renders the assessment order erroneous in as much as it makes the same prejudicial to the interest of the revenue and therefore the same seems amendable to revision in terms of the provisions of section 263 of the Income Tax Act. 2.2 In response to the show cause notice, the assessee submitted that the provisions of section 40A (3) were not applicable in the instant case as no expenditure had been claimed by the assessee. The assessee also submitted that where two views are possible and the AO had taken one possible view with which the Ld. Pr. CIT does not agree, the same cannot be treated as an erroneous order prejudicial to the interests of revenue. 2.3 However the Ld. Pr. Commissioner of Income Tax was of the view that it was wrong on the part of the assessee to contend that purchase was not expenditure and no expenditure had been claimed by the assessee. The Ld. Pr. CIT further noted that purchase was definitely expenditure as sales was an item of income. The Ld. Pr. CIT also noted that the expenditure on account of purchase of land gets set off against income arising from sale of land and becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the course of reassessment order u/s 147 of the Act. Ground No. 6 : The Learned CIT has not considered the relevant condition for initiation of proceedings u/s 263 of the Act. The appellant contends that since the assessing officer has completely verified the facts in the reassessment order u/s 147 of the Act. The said order cannot be held as erroneous and the same cannot be considered u/s 263 of the Act. Ground No. 7: The Learned CIT has erred on facts and circumstances of the case and in law by directing the assessing officer to pass an appropriate order wherein an addition of ₹ 35.70 crores on account of disallowance u/s 40A(3) of the Act is directed. Ground No. 8: The Learned CIT has grossly erred in the interpretation of Section 40A(3) of the Act wherein disallowance is proposed for any cash expenditure of above ₹ 20,000. Appellant contends that the provisions of Section 40A(3) can be imposed only if an assessee has claimed deduction for an expenditure. Since the appellant has not claimed any deduction for land purchased during the year, the question of disallowance shall not arise. 3. The Ld. Sr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears and as such there was a clear violation of the provisions of section 40A(3) of the Act by the assessee. The Ld. CIT DR also placed reliance on an order of the ITAT Jodhpur bench in the case of Vaishali Builders and Colonisers versus ACIT reported in 138 ITD 227 wherein the ITAT Jodhpur Bench had held that since the assessee was dealing in real estate and the land purchased was stock in trade, the payment made for purchase of land was expenditure in the business of the assessee and attracted the provisions of section 40A (3) of the Act. The Ld. CIT DR prayed that the order passed under section 263 of the act be upheld. 5. We have heard the rival submissions and have also perused the material on record. The facts of the case are undisputed. It is undisputed that the assessee had not claimed any expenditure towards purchase of land during the year under consideration. It also undisputed that the assessee s case was reopened under section 147 of the Act only on the ground that assessee had made huge cash withdrawals and huge cash deposits in its bank accounts during the year under consideration. The of reasons recorded for reopening dated 22/03/2013 mentioned that the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i High Court in the case of Ranbaxy Laboratories Ltd versus CIT reported in 336 ITR 136 (Delhi). It flows from this that if the AO was not in a position to examine that issue, then in our opinion, the Ld. Pr. CIT would also not been a position to take cognizance of the issue under section 263 of the Act. In other words, even if, it is upheld that the reassessment under section 147 of the act was erroneous and prejudicial to the interest of the revenue, then also on revival of such issue, the AO has to first see whether any addition could be possible on the escapement of income for which he has recorded the reasons. If it is established on record that there is no escapement of income for which the reasons were recorded, then in view of the two judgments, as aforesaid, no other issue could be examined by the AO. Similar view was held by the Hon ble Delhi High Court in CIT (Exemptions) versus Monarch Educational Society reported in 387 ITR 416 (Delhi), Oriental Bank of Commerce versus Additional CIT reported in 272 CTR 56 (Delhi) and CIT versus Cheil Communications India Private Limited reported in 354 ITR 549 (Delhi). 5.3 Thus, we are of the considered opinion the Ld. Pr. CIT coul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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