TMI Blog2023 (2) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... has been passed under Section 143(3) of the Act by the Ld.AO after due verification of the same issue as raised in the order impugned passed under Section 263 of the Act and that too upon causing exhaustive enquiry and finalising the same after taking a possible view, the invocation of provision of Section 263 on the basis of change of opinion is, thus, not found to be sustainable. We have also found substance in the arguments advanced by AR that the original order needs not to give detailed reason. Further that, when one possible view has been taken by the Ld.AO the said cannot be treated as erroneous and prejudicial to the interest of the Revenue - See NIRMA CHEMICALS WORKS P. LTD. (AND VICE VERSA) [ 2008 (2) TMI 373 - GUJARAT HIGH COURT] and KAMAL GALANI [ 2018 (6) TMI 1052 - GUJARAT HIGH COURT] - Decided in favour of assessee. - I.T.A. No. 59/Ind/2022 - - - Dated:- 24-1-2023 - Ms. Madhumita Roy, Judicial Memebr And Shri Bhagirath Mal Biyani, Accountant Member For the Appellant : Shri S.N. Agrawal Shri Bhavesh Agrawal, CAs For the Respondent : Shri P.K. Mishra Shri P.K. Mitra, CIT-DRs ORDER PER Ms. MADHUMITA ROY, JM: The instant appeal filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 470/-. Subsequently, the Ld. PCIT invoked the provisions of section 263 of the Act and issued the following show cause notice to the assessee (relevant extract is reproduced below): 03. On perusal of the details on record of the relevant year, it is seen that, the notice u/s 143(2) of the Income Tax Act, 1961 was issued by the AO on 11.08.2018 to produce any evidence on which the assessee may rely in support of the said return of income by 21.08.2018. Further, the notice under sub section (1) of Section 142 of the Income Tax Act, 1961 was issued to the assessee on 10.04.2019 for furnishing the relevant documents. On examination of the records, following discrepancies are noted. 3.1. On perusal of the submission on record, it is seen that you had submitted the computation of income in the case of assessee for A.Y. 2017-18 wherein you have claimed the deduction u/s 54F of the IT Act of Rs. 85,86,419/- and deduction u/s 54B of Rs. 91,35,500/- A.Y. 2017-18. However, no conclusive evidence and supporting documents had been furnished before the assessing officer to establish the admissibility and correctness of the claim for the deduction u/s 54F of the IT Act of Rs. 85,86,419/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven on BATAI . But this statement is unsupported by any evidences.. As per Anuband Lekh (i.e Agreement-Deed) placed on record, it is noted that the land was given on Batai for 6 Quintals of wheat, as rent to be paid to the assessee which is also not supported by any evidences on record to show that any agricultural activity was being undertaken even by the Bataidar . On further perusal of the income tax returns on ITBA filed by the assessee for the last two year i.e. 2015-16 and 2016-17 no agricultural income has been offered by the assessee. This clearly indicated that no agricultural activities have been carried out on the land. Hence the land transferred is not an agricultural land and the assessee has not fulfilled the basic condition to claim the exemption/deduction u/s 54B and not eligible to claim the exemption which resulted in under assessment of income of 91,35,000/-. 3.2(b) Wrong claim u/s 54F The assessee has purchased a plot no. 15 and 14 situated in Mahesh Nagar on 13/12/2016 amounting to Rs. 67,33,200/- as per the purchase deed placed on record. The cost of the plot with other expenses shown at Rs. 73,64,000/-. The assessee has further claimed Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Ld. PCIT to demonstrate the fact that the case of the assessee was selected for Limited Scrutiny for examination of issue related to Deduction/ Exemption from capital gains and that the Ld. AO raised specific queries during the course of assessment proceedings requiring the assessee to justify the deduction claimed u/s 54B and 54F of the Act as filed at Page Nos. 38 39 of the Paper Book. It was further submitted that the assessee furnished all the requisite details along with supporting documentary evidences before the Ld. AO at Page Nos. 40 41 of the Paper Book and the Ld. AO allowed the claim of deduction u/s 54B and 54F of the Act only after examining all the relevant material placed on record thereby leaving no scope to usurp the revisionary jurisdiction vested with the Ld. PCIT. However, the Ld. PCIT was not convinced and was of the view that the Ld. AO should have examined this issue related to Deduction/ Exemption from capital gains in detail and accordingly, the assessment order was held to be erroneous and prejudicial to the interest of Revenue by the Ld. PCIT. 5. Now the assessee is in appeal before the Tribunal challenging the jurisdiction of Ld. PCIT a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces, we need to examine the maintainability of the proceedings under Section 263 of the Act, the statutory provision exercised by the Ld.PCIT in interfering with the order passed by the Ld.AO. In fact, it is to be examined whether the order passed by the Ld.AO can be interfered with by the revisional power of the Commissioner of the Income Tax unless the said order is found to be really erroneous and prejudicial to the interest of the Revenue. 11. The phrase prejudicial to the interest of the Revenue has to be read in conjunction with an erroneous order passed by the Ld. AO. Moreso, every order of Revenue cannot be treated as prejudicial to the interest of the Revenue as a consequence of an order of the Ld.AO. Apart from that where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous or prejudicial to the interest of the Revenue unless the view taken by the ITO is unsustainable in law. On this ground, the Ld. A.R. has relied upon the judgment passed by the Hon ble High Court of Gujarat in the case of CIT vs. Nirma Chemicals Works Pvt. Ltd. Reported in (2009) 182 taxman 183 (Gujarat). It was furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Officer before making the assessment and after examining when he accepted the contention of the assessee its discussion did not find place in the assessment order, as no additions were going to be made or no modifications in the return filed by the assessee were required to be made in that regard. This contention of the assessee appears to be well-founded. It is true that the assessment order does not speak about the examination of goodwill account as such. However, as we have noticed above, the assessee in his reply to the show-cause notice under section 263 had specifically mentioned that the entire matter was scrutinised and accepted while passing the assessment order. Our attention was also drawn to annexure 'D . A submission made by the assessee to the Income-tax Officer, Surat, dated 18-10-1976, regarding the assessment year 1974-75 giving detailed chronological data of the constitution of the firm on November 11, 1968, induction of four more partners on 7-11-1972, the creation of goodwill in the books of account of the firm by debiting the goodwill account and crediting the old partners' capital accounts in their profit sharing ratio on that date, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law. 25. Applying the aforesaid tests to the facts of the case it is not possible to uphold the order of the Tribunal as regards jurisdiction after considering the law enunciated by the Apex Court. The Assessing Officer after making due inquiries, as noted hereinbefore, adopted one view and granted partial relief under section 80-1 of the Act. The Commissioner of Income-tax takes a different view of the matter. However, that would not be sufficient to permit the Commissioner of Income-tax to exercise powers under section 263 of the Act because when two views are possible and the Commissioner of Income-tax does not agree with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is judicially interpreted in several decisions that the intention of legislature behind introduction of Explanation 2 could not have been to enable the PCIT to find fault with each and every assessment-order in unlimited terms, since such an interpretation would lead to unending litigation and there would not be any point of finality of assessment-proceeding done by Ld. AO. 14. At this stage, we refer a recent decision of ITAT, Rajkot in M/s Pramukh Realty, Junagadh, ITA No. 93/Rjt/2022 dated 30.06.2022, where the Hon'ble Bench has extensively dealt a similar case where (i) the assessee had filed details / documents to Assessing Officer during assessment-proceeding; (ii) the AO had considered the same and passed assessment-order thereafter; (iii) Ld. PCIT has made revision invoking Explanation 2 to Section 263 of the Act. After a thorough analysis, the Hon'ble Bench has held that in such circumstances, revision u/s 263 of the Act cannot be done. The relevant paragraphs of the decision are reproduced below: 5. The learned AR before us filed a paper hook running from pages 1 to 157 and contended that all the necessary details about the advances received from the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Vs. Sunbeam Auto 332 ITR 167 (Del.), made a distinction between lack of inquiry and inadequate inquiry. The Hon ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 of the Act on the ground of inadequate inquiry. The relevant observation of Hon ble Delhi High Court reads as under: 12. . There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between lack of inquiry and inadequate inquiry . If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of lack of inquiry , that such a course of action would be open.--- From the aforesaid defin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity. 7.4 The Mumbai ITAT in the case of Sh. Narayan Tatu Rane Vs. ITO, I.T.A. No. 2690/2691/Mum/2016, dt. 06.05.2016 examined the scope of enquiry under Explanation 2(a) to section 263 in the following words:- 20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded assessee's on-money transactions and Tribunal, thus, set aside the revised order passed by Commissioner. The Hon ble High Court upheld Tribunal's order. The Hon ble Supreme Court while dismissing the SLP filed by the Department held as under:- We have heard learned counsel for the Revenue and perused the documents on record. In particular, the Tribunal has in the impugned judgment referred to the detailed correspondence between Assessing Officer and the assessee during the course of assessment proceedings to come to a conclusion that the Assessing Officer had carried out detailed inquiries which includes assessee's on-money transactions. It was on account of these findings that the Tribunal was prompted to reverse the order of revision. No question of law arises. Tax Appeal is dismissed 7.6 The Supreme Court in the another recent case of Principal Commissioner of Income-tax- 2, Meerut v. Canara Bank Securities Ltd[2020] 114 taxmann.com 545 (SC), dismissed the Revenue s SLP holding that 263 proceedings are invalid when AO had made enquiries and taken a plausible view in law, with the following observations: Having heard learned counsel for the parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e demonization period. It is not the case of the Pr. CIT that the Ld. AO did not apply his mind to the issue on hand or he had omitted to make enquiries altogether. In the instant set of facts, the AO had made enquiries and after consideration of materials placed on record accepted the genuineness of the claim of the assessee. 7.10 At this juncture, it is also important to note that the learned PCIT in his order passed under section 263 of the Act has made reference to the explanation 2 of section 263 of the Act. It was attempted by the learned PCIT to hold that there were certain necessary enquiries which should have been made by the AO during the assessment proceedings but not conducted by him. Therefore, on this reasoning the order of the AO is also erroneous insofar prejudicial to the interest of revenue. In this regard, we make our observation that the learned PCIT has also not specified the nature and the manner in which the enquiries which should have been conducted by the AO in the assessment proceedings. Thus, in the absence of any specific finding of the learned PCIT with respect to the enquiries which should have been made, we are not convinced by his order passed u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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