TMI Blog2022 (4) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... se notice is not mentioned in the assessment order. When the case of the assessee was selected under CASS to examine the capital gains then the AO was required to examine the case meticulously on all the issues including the applicability of Section 50C for determining the correct income of the assessee and should pass a speaking order. Not only that the claim of income under business head cannot be made in ITR-2. Looking to all these apparent error in the order of the AO, it leaves the assessment open to the invocation of provision of Section 263. Pr. CIT has rightly invoked the provisions of Section 263 of the Act in the case of the assessee - Appeal of assessee dismissed. - ITA No. 639/JP/2018 - - - Dated:- 30-3-2022 - Shri Sandeep Gosain, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Assessee : Shri Ashish Sharma, Adv. For the Revenue : Shri Sanjay Dhariwal, CIT ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM The assessee has filed an appeal against the order of the ld. Pr. CIT(A)-1, Jaipur dated 14-03-2018 u/s 263 of the I.T. Act, 1961 for the assessment year 2013-14. The assessee has taken following grounds:- 1. The ld. PCIT, J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ismissed being not pressed. 4. Brief facts of the case are that the assessee filed the return of income on 28.12.2013 declaring a total income of ₹ 59,48,940/-. The case of the assessee was selected for scrutiny through CASS, and accordingly notice u/s 143(2) of the I.T. Act, 1961 was issued by ITO, Ward-2(4), Jaipur, on 02.09.2014 fixing the date of hearing for 16.09.2014, which was duly served upon the assessee. The case was later transferred to Circle-2, Jaipur, as the correct jurisdiction of the case lies with DCIT, Circle-2, Jaipur. The jurisdiction over this case had been assigned from the DCIT Circle-2, Jaipur to the Income tax officer, Ward- 2(4), Jaipur by the ld. Pr. CIT-1, Jaipur in exercise of powers conferred by sub section (2) of section 127 of I.T. Act, 1961 vide his office order no. 2910 dated 05.02.2016. A fresh notice u/s 142(1) was issued on 05.02.2016 on change of incumbent. As no compliance was made, notice u/s 142(1.) was again issued on 19.02.2016, fixing the case for hearing 26.02.2016. In response to the said notice, Shri Ashish Sharma, Advocate and ld.AR of the assessee, attended and filed written reply along with the required information. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- was made, out of these expenses, by the AO. Taking into consideration the above disallowances, the AO computed the total income of the assessee amounting to ₹ 66,13,060/- which included disallowance of interest expenses of ₹ 6,34,122 and unvouched expenses of ₹ 30,000/- apart from returned income of ₹ 59,48,940/-. 5. On completion of assessment proceeding, the ld. PR.CIT-1, Jaipur initiated the proceeding by invoking the provision of Section 263 of the Act as he was of the view that the assessment was made in routine manner just by accepting the fresh claim of the assessee regarding changed head of income for income declared as against the declared head of income in the return of income. 5.1 The ld. Pr.CIT-1,Jaipur keeping with the requirements of natural justice and placing reliance on Explanation 2 of Section 263 of the Act, a show cause notice was issued to the assessee. Sub:-Show cause notice u/s 263 of the Income Tax act 1961 , A.Y. 2013-14-reg. From perusal of the assessment records in your case it is seen you are engaged in real estate trade. The return of income had been filed by you declaring total income at ₹ 59,48, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Plot No. C-64 Value adopted by Sub-registrar 10616150 Purchase value 1650000 Short term capital gains 8966150 Total Taxable capital gains 8590328+8966150= ₹ 17556478 The AD finalized the assessment u/s 143(3) at ₹ 66,13,060/- after making addition of ₹ 30,000/- to the returned income of ₹ 59,48,940/- and taxed this income as business income instead of income from short term capital gains. Thus, the income for A.Y. 2013-14 has been under-assessed to the extent of ₹ 1,09,43,418/-. It is seen that in your case assessment has been completed u/s 143(3) of the I. T. Act 1961, and the details of business activities as provided by you has been accepted by the assessing officer in totality barring expenses disallowed as stated above in this letter and the income from short term capital gains has been treated as income from business and taxed accordingly. However, the taxability of short term gains has not been examined or verified by the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the issue of not-conducting proper inquiries regarding taxability of income under declared head of income making the order erroneous and prejudicial to the interest of revenue, the assessee has submitted that voluminous details were submitted along with books of accounts and filed reply as to how the provisions of Section 50C of the Act were not applicable to the given facts and circumstances of the case. The fact that the assessee submitted details is not denied. What is considered here is the lack of examination and critical scrutiny of those details by the AO before accepting the statement of the assessee. Non application of mind to relevant material makes the order of the AO being termed as erroneous as done in this case .This has resulted in an underassessment of the income of the assessee and short levy of tax. The assessee's statement that section 50C is not applicable in its case is unacceptable as from the assesses own declaration it is seen that he has sold assets that are capital assets being investments and they thus definitely attract provisions of section 50C of the Income tax act. 2) In his reply to second issue the assessee claims to substantiate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y other account. Similarly, income for A.Y. 2013-14 is from capital gains and not from business profession which finds strength from the fact that the assessee filed his return of income in ITR-2 which is certainly not for the persons who carries on business or profession. Further, the mistake cannot be attributed to the action of persons filing the ROI on behalf of the assessee as they do so on the basis of details submitted to them by the assessee and as per his directions. It is also for consideration here that his ROI has been filed by a professional and a professional has knowledge of Income Tax Act and is duty bound to file the ROI in correct form and under correct head of income as has been done in this case. Ignorance of I.T .Law cannot become an excuse if a professional help is taken. 4) The observation regarding that it has been accepted that he derives business income from real estate it is stated that even though it may have been mentioned that the assesseeis in real estate trade it does not hold that in the year under consideration it is to be accepted that the income derived is from the sale of stock in this trade. Each real estate transaction is to be seen acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessed and thus supplement the independent opinion formed that this is a case for invocation of sec 263 of the IT act. 5) The contention that the order u/s 143(3) dated 29.03.2016 was passed after making proper enquiries, examination of books of account and application of mind is not acceptable at all. As detailed above the AO has not even examined the return of income for the year under consideration wherein income from capital gains was shown and without referring to the return of income for A.Y. 2012-13 at all which was the basic requirement of a scrutiny assessment. 6) Case laws cited by the assessee were examined. The assessee has relied on the judgement of the Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 to say where two opinions are held no application of section 263 is mandated . This is true but in the instant case there are no two opinions on the issue. The AO has grossly erred in not looking into the details and the head of income declared by the assessee himself in his ROI filed. That needed to be done before any acceptance of a statement made by the assessee's representative during the course of assessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that judicial authorities have delivered judgements in favour or against initiation of section 263 of the Income Tax Act which are very case specific that is to say that each case would need to be examined on merit individually. However as broadly 'stated in the order of Bharathi Hexacom Ltd versus CIT (2013) 21 ITR (T) 648 (Delhi) (Trib) and that of M/s. Crompton Greaves versus CIT -6, Mumbai dated 1/2/2016 (ITAT - Mumbai) in TA . No 1994/Mumbai/2613 and 2836/Mumbai/-2014 for assessment year 2007-08, the failure by the assessing officer to make proper inquiry in respect of the claim made by the assessee makes his order erroneous and prejudicial to the interest of revenue and therefore liable to revision under section 263 of the Income Tax Act. 7. The ld. Pr.CIT-1, Jaipur has given his detailed finding on para 9 of his order and the same is reproduced as under:- 9. Therefore with reference to the discussion above it can be said that:- In the first instance it is noticed that the assessee has claimed that assessing officer had verified the details that had been placed before him and therefore it cannot be stated that verification had been done. I have caref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest of revenue. The assessing officer has not called upon the assessee to establish/prove the claim or discharge the burden of proof placed on it. The assessing officer before accepting the statement of the assessee ought to have requested the assessee to discharge the onus that was upon him to establish its claim and should have conducted further enquiry before accepting the claim of the assessee. No queries or enquiries made by the assessing officer while scrutinizing a case for assessment especially when a major issue of applicability of Section 50C of the Act on the declared income under other head capital gains was involved, makes the order itself liable to be termed as a mechanical acceptance. This action has allowed the assessee short levy of taxes on an under-assessed income as detailed above in this order. This renders the order not only erroneous but also prejudicial to the interest of revenue. As the income of the assessee stands under-assessed it leaves the assessment open to the invocation of section 263 of the I T Act 1961. Accordingly, the request of the assessee that proceedings under section 263 be dropped as the assessing officer has passed the order i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and relied on various case laws, some of which are mentioned as under:- 1. Adani Exports vs DCIT, 240 ITR 224 (Guj) 2. Pr.CIT-3, New Delhi vs Delhi Airport Metro Express Pvt. Ltd. (ITA No.705/2017 dated 5-09-2017) 3. CIT vs Vikas Polymers, 341 ITR 537 (Del) 4. CIT vs Krishna Capbox (P) Ltd. 373 ITR 310 (All) (Head Note) The ld.AR of the assessee in his written submission prayed that on a holistic consideration of facts, circumstances of the case and legal decisions, the action of the ld. Pr. CIT needs to be quashed. 9. On the other hand, the ld. DR supported the order of the ld. PR.CIT and argued that return of income filed by the assessee is prime document for making assessment. Relying on the decision of Goetze (India ) Ltd case, AO cannot change a stand which is contrary to the return of income filed. Even the Form No. ITR-2 filed is also not for business income and ld. DR also relied on his written submission as extracted herein below. The brief facts of the case are that the assessee has purchased plot no. and C-62, C 54 C 55' (PB-55) and C 64 (PB-59) at Gayatri Enclave on 24.09.2009 and 26.09.2009 for a consideration of ₹ 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d loss account of the assessee for the FY 2011-12 (PB-11), there was no sale or purchase and indirect income of ₹ 58,87,791/- has been declared and net profit was declared at ₹ 51,49,594/- without having any reference to opening and closing stock. The kind attention of the Hon'ble Bench is invited to assessment order for AY 2012-13 (PB-12 to 20), wherein the AO has assessed the entire amount of ₹ 58,87,740/- from `Gayatri Enclave' as 'income from other sources' and did not allow any expense as claimed by the assessee in its above referred P L account. Thus, the claim of the assessee that it has developed `Gayatri Enclave' and was in the real estate business was not accepted by the AO in the assessment order for AY 2012-13. It is pertinent to mention that the assessee has filed 4 different balance sheets as on 31.03.2012 which were enclosed by the AO with the assessment order for AY 2012-13. It may be mentioned that the assesseehas filed its return of income in ITR-2, which is not meant for business and in its computation of income(PB-49) for AY 2013-14, it has declared `STCG' at ₹ 64,81,787/-and it has not shown any income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial properties situated at Gayatri Enclave, Village,Jhujharpura,Tehsil-Sanganer. Plot No. Date of Sale Sale Consideration received Value adopted by Sub-Registrar for registration purposes. C-64 18-09-2012 ₹ 50,00,000 ₹ 1,06,16,150 C-62 18-09-2012 ₹ 50,00,000 ₹ 1,06,15,216 The assessee in the return of income filed in ITR-2(in Part B-TI(3)( c ), short term gains had been shown at ₹ 64,81,787/-. In Schedule CG, full value of consideration shown at ₹ 1,12,01,000 (as against value adopted by Sub- Registrar at ₹ 2,12,31,366/-) and after claiming cost of acquisition at ₹ 47,19,213/- short term capital gains have been shown at ₹ 64,81,787/-. However, in Schedule BLFA(iii), return of income was filed wherein short term capital gain was declared at ₹ 59,48,935/-.The income of the assessee was liable to be taxed as short term capital gain as per the provisions of Section 50C of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a detailed reply to the said show cause notice which is filed in assessee's paper book pages 10 to 13. All the submission is related to the facts that about how the property is acquired and what are the issues in that property. As regards the applicability of Section 50C of the Act, the reply of the assessee is reproduced herein below:- Your assertion that the aggregate value as assessed by Sub- Registrar as per DLC rate is liable to provision of section 50C without indexation, benefits and assessable as short term capital gains is for removed from the facts and circumstances, in which these properties were acquired /sold. Firstly, the properties were business assets of the assessee and therefore, section 50C is not applicable. Secondly the DLC rate of the sub-registrar, while mandatory for the purposes of section 50C is not sacrosanct in case of sale of business asset. Not only that there is no discussion about the issue of show cause notice in the assessment order and its submission of the assessee on that reply. Why this fact has not been discussed in the assessment order which itself suggests that the order is non-speaking order and this order is prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the assessee denovo in accordance with law after making the necessary enquiries, examination and verification in respect of the claim made by the assessee regarding the issue under discussion. The AO is directed to finalize the assessment keeping in view the information available in income tax returns and audited books of accounts and the details regarding the assessee's income for assessment years 2012-13 which indicated the receipt of income from sale of investments in this case. Provisions of section 50C which are clearly applicable to this case are to be invoked for calculation of STCG. It is clear that the income for A.Y. 2013-14 has been underassessed as detailed above in this order due to an erroneous order made by the AO which is prejudicial to the interest of revenue to the extent of ₹ 1,75,56,478/-. An opportunity is to be allowed to the assessee to state its case in the interest of natural justice. 12 Keeping in view the finding of facts and circumstances of the case, the relied upon case laws by the ld.AR of the assessee are on different facts and circumstances. Once the facts are not similar, no relevance was there on the finding of this c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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