TMI Blog2022 (4) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... o records as it stands at the time of the examination by the CIT. Nothing prohibits CIT from collecting and relying new/additional material which evidence to show and state that the order of the AO is erroneous. We find that Ld. PCIT in the present case has not carried out any enquiry of his own and has merely set aside the assessment to the file of the AO to re-examine the issue of claim of deduction u/s 54B towards LTCG on sale of agriculture land since no agriculture income has been reflected in the return of income by the assessee. Therefore, it is contrary to the guidelines as mandated in the Hon'ble Delhi High Court decision in the case of ITO v. DG Housing Projects Ltd. [ 2012 (3) TMI 227 - DELHI HIGH COURT] Therefore, the consideration arrived at by the Ld. PCIT invoking provisions of section 263 of the Act on the issue recorded by him is not justified and cannot be sustained under the facts and circumstances of the present case. The co-ordinate bench of Mumbai ITAT has dealt with Explanation 2 as inserted by the Finance Act, 2015 in the case of Narayan Tatu Rane v. Income Tax Officer [ 2016 (5) TMI 1162 - ITAT MUMBAI] to hold that the said Explanation cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing the order under section 263 even though the assessment order under section 143(3) dated 19th November 2018 passed by the Assessing Officer (AO) was neither erroneous nor prejudicial to the interest of the Revenue. 3. That on the facts and in the circumstances of the case and in law, the AO after due examination of the relevant facts having already followed one of the course permissible in law, the Ld. Pr. CIT was unjustified in setting aside the assessment on the issue of allowing exemption of LTCG of ₹ 1,79,16,066/- on sale of agricultural land and directing the AO to re-adjudicate the same issue after re-examination of the facts. 4. For that on the facts and in the circumstances of the case, the order of the CIT passed u/s 263 be cancelled since the assessment order u/s 143(3) dated 19.11.2018 was neither erroneous nor prejudicial to the interest of the revenue. 5. The Appellant craves leave to add, alter, amend and/or withdraw any of the grounds or ground of appeal either before or at the time of appeal hearing. 3. Brief facts as culled out from records are that the assessee filed her return of income on 30.03.2017 reporting total income at Nil. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 1,79,16,066/-. But there is no agricultural income accounted for the relevant F.Y in the return of Income. Therefore the long term capital gain should be added back to the total income of the assessee. Since there was no reflection of agricultural income or loss in the return income for the F.Y. 2015-16, the assessee should not get exemption u/s.54B on LTCG for ₹ 1,79,16,066/- on sale of agricultural land during the relevant F.Y. AO has passed the impugned assessment order without any application of mind nor conducting any enquiries or verifications which should have been made in this case. [emphasis supplied by us] The assessee furnished its reply dated 05.02.2021 before the Ld. PCIT as reproduced in the impugned order, explaining its case against the SCN. 5. On 19.02.2021, the Ld. PCIT passed the impugned order, inter alia , observing in Para 2 as under: 2. On a perusal of the assessment record of the assessee, it was observed as under: In the instant case, the assessment was completed at an income of ₹ 71,855/-. The assessment was completed u/s. 143(3) on 19.11.2018. Subsequently it is detected that the assessee being an individua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so far as it is prejudicial to the interests of the revenue. I further hold, after giving the assessee an opportunity of being heard, that the impugned assessment order dated 19.11.2018 is liable to setaside. Therefore, I set aside the said assessment order directing the A.O. to frame the assessment afresh after considering the aforesaid observations, Hon'ble Supreme Court and Hon'ble High Court decisions and as per law. 12. In the result, the assessment order u/s 143(3) dated 19.11.2018 for A. Y. 2015-16 is set-aside to the file of the Assessing Officer with a direction to pass a fresh assessment order after considering the aforesaid observations, as per law and after giving an opportunity of being heard to the assessee. [emphasis supplied by us] 6. Learned Counsels for the assessee Shri N.S. Saini and Ms. Priyanka Salarpuria, represented the matter and took us through the facts of the case corroborating with the material placed on record in the paper book and written submission. Ld. CIT(DR) Shri Sudipta Guha represented the matter for the Revenue. 7. At the outset, Learned Counsel for the assessee submitted that Ld. PCIT has grossly erred in assuming his juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on LTCG for ₹ 1,79,16,066/- on sale of agricultural land during the relevant F.Y. AO has passed the impugned assessment order without any application of mind nor conducting any enquiries or verifications' which should have been made in this case. By taking the bench through these records, the Ld. Counsel strongly contended that the very foundation on which the Ld. PCIT has assumed the jurisdiction to invoke provisions of section 263 is on an absolutely incorrect set of verifiable facts and therefore the impugned order is liable to be quashed ab initio . 7.2 Learned Counsel further submitted that Ld. PCIT has grossly erred in assuming his jurisdiction and initiating proceedings u/s. 263 of the Act since in the assessment order passed by the Ld. AO, in respect of all the three reasons because of which the scrutiny selection of the case was done, he had not only made adequate enquiries but also undertaken necessary verification of the details which were furnished during the course of assessment proceedings and on the basis of which he had taken permissible views. 7.3 Ld. Counsel submitted that during the assessment proceedings all the three reasons stated above for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... little more or less, situate, lying at and being the divided and demarcated parts or portions of C. S./R. S. Dag Nos. 3189 (11.0 decimals) and 3187 (38.5 decimals), and the entire C.S/R.S Dag Nos. 3188(9.0 decimals) and 3214/4062 (25.0decimals), R. S. Khatian Nos. 1018, 1028, 1382 and 1979, Mouza: Chamrail, J.L No. previously 5 now 105, P. S. Liluah, District Sub Registrar, Howrah, Additional District Sub Registrar, Howrah, within the limits of Chamrail Gram Panchayat and butted and bounded in the manner following, i.e. to say. ON THE NORTH: By C S/R. S. Dag Nos. 3215 and 3216; ON THE EAST: Partly by part of C. S./R. S. Dag No. 3196(P) and part of C. S/R. S. Dag No. 3212(P), C. S. Dag Nos. 3213, and C. S. Dag No. 3214; ON THE WEST: By part of C. S/R. S. Dag No. 3187(P) and C. S./R. S Dag No. 3190; ON THE SOUTH: By C. S./R. S. Dag No 3189(P); The details of the said land with shed are as below: C.S./R.S. Dag No. R.S Khatian No. L.R Dag No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing at his conclusion that the order of the AO is erroneous as well as prejudicial to the interest of the Revenue. 7.8 Ld. Counsel placed reliance on various judgments including in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 109 Taxman 66 (SC) by Hon ble Supreme Court and DG Housing Projects Ltd [2012] 343 ITR 329 (Del) by Hon ble Delhi High Court. Relevant extracts from the decision of DG Housing Projects Ltd. ( supra ) are reproduced as under 16. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT [see CIT v. Shree Manjunathesware Packing Products Camphor Works [1998] 231 ITR 53 / 98 Taxman 1 (SC)]. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. 19. In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that order passed by the Assessing Officer may be erroneous . The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation 1.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court shall be excluded. 10. From perusal of the aforesaid section, it is apparent that there are mainly four features / stages of the power for revision to be exercised u/s 263 of the Act by the Ld. PCIT i. The PCIT may call for and examine the records of any proceedings under the Act and for this purpose he/she need not show any reason or record any reason to believe as it is required u/s 147 or 143(2) of the Act. It is a part of his/her administrative control to call for the records and examine them. ii. The PCIT on an analysis of both, the records and the order passed by the Assessing Officer arrives at a consideration that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. This is exercised by calling for and examining the records relating to any proceeding under this Act available at the time of examination by the PCIT. Till this stage, assistance of the assessee is not required by the PCIT. iii. If after calling for and examining the records and the assessment order, the PCIT considers that the order of the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue, he/she is bound to g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31. Ld. PCIT states in Para 2 of the impugned order that subsequently it is detected that the assessee being an individual had claimed exemption u/s 54B on long term capital gain on sale of land for ₹ 1,79,16,066/-. But there is no agriculture income accounted for the relevant F.Y. in the return of income. Therefore the long term capital gain should be added back to the total income of the assessee. Since there was no reflection of agriculture income or loss in the return income for the F.Y. 2015-16, the assessee should not get exemption u/s 54B on LTCG for ₹ 1,79,16,066/- on sale of land during the relevant F.Y. [emphasis supplied by us] 11.3 As noted above, Ld. Counsel took us through the return of income to demonstrate that there is no claim made by the assessee u/s 54B in the return. Even in the computation of income there is no such claim u/s 54B towards LTCG on sale of agriculture land. Ld. PCIT has detected the claim of section 54B and because there is no reflection of agriculture income in the return of the assessee, he formed a considered opinion that assessee should not get exemption u/s 54B on the LTCG of ₹ 1,79,16,066/- in respect of sale of lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, within a period of two years after that date, purchased any other land for being used for agricultural purposes, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,- .. Assuming if the impugned order is upheld, the Ld. AO will be required to comply with the observation given by the Ld. PCIT as noted in Para 5 ( supra ) of the impugned order. While complying with the observations by the Ld. AO, it is undisputed fact that there is no claim u/s 54B made by the assessee in her return of income, which itself will create a hurdle for the Ld. AO in taking up the matter further to enquire on earning of agriculture income so as to fulfill the directions of the Ld. PCIT given in the impugned order. 11.4 Exercise of revisionary power u/s 263 of the Act is a quasi-judicial power hedged in with limitation and has to be exercised subject to the same and within its scope and ambit. So far as calling for the records and examining the same is concerned, undoubtedly, it is an administrative act, but on examination t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th, the records and the order passed by the Assessing Officer has to arrive at a consideration that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. This is exercised by calling for and examining the records relating to any proceeding under this Act available at the time of examination by the PCIT. The term record has been explained in Explanation 1(b) to section 263 of the Act as record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Commissioner or Commissioner. 11.8 Record shall include all the documentary evidences which were submitted before Ld. AO and also those submitted before Ld. PCIT against the SCN issued to invoke the provisions of section 263. Ld. PCIT is required to examine all the documentary evidences including those which were before Ld. AO and submitted before him. We find that in the return of income as well as the computation of income of the assessee on record, there is no claim of exemption made by the assessee u/s 54B of the Act. For the above finding of ours, we find force from the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of section 263 of the Act, both the conditions that the order must be erroneous and prejudicial to the interest of revenue needs to be satisfied. This ratio stands laid down by various Hon'ble Courts. 12.1 Further, we find that it is not a case where there was no enquiry at all by the Ld. AO. Our perusal of the notice u/s 142(1) dated 20.08.2018 issued by the Ld. AO and the reply dated 25.10.2018 filed by the assessee in the course of assessment, reveals that Ld. AO did enquire in to the claim of assessee in respect of exemption on long term capital gain on sale of captioned agriculture land which was one of the three reasons for selection of the case of assessee for scrutiny assessment under CASS. Here, in support of our finding, we would like to refer the judgment of Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar Sharma [2011] 335 ITR 83 (Del) wherein it has been held dismissing the appeal that the present case would not be one of, lack of inquiry even if the inquiry was termed inadequate. The Tribunal found that complete details were filed before the Assessing Officer and that he applied his mind to the relevant material and fact, although such ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is erroneous but has directed the AO to decide the aspect/question. The Hon'ble Court further held that this distinction must be kept in mind by the CIT while exercising jurisdiction u/s 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged inadequate investigation , it will be difficult to hold that the order of the AO, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/enquiry himself. The order of the AO may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the AO to decide whether the order was erroneous. This is not permissible. An order is erroneous, unless the CIT holds and records reason why it is erroneous. Therefore, CIT must after recording reasons, hold that order is erroneous. The jurisdictional pre-condition stipulated is that CIT must come to the conclusion that the order is erroneous and is unsustainable in law. It was further obse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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