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2019 (12) TMI 301 - AT - Income TaxRevision u/s 263 - source of cash deposit - sale of land - computation of Long Term Capital Gain/loss - HELD THAT - Explanation 2 does not envisage that Assessing Officer should go to the last point of inquiry on the issue. What is expected from the AO to carry out reasonable and pragmatic inquiry so as to justify his actions and which manifests his application of mind. If inquiry is found to be fleeting or eyewash then it can be held that inquiry has not been done by the AO. Here in this case, we find that AO has examined all the relevant documents asked by him from time to time and after verifying the documents and copy of sale deed he has reached to a conclusion that the source of cash deposits in the bank account has been explained which were tallying from the copy of sale deeds. Even the computation of Long Term Capital Gain/loss was found to be correct in view of the documents furnished and from the Approved Valuer s report. If the assessee has sold the land at a price mentioned in the sale deed, then onus is not on the assessee to show that from where the purchasers have paid the money. Thus, the onus as cast upon the assessee stood duly discharged and Assessing Officer has correctly allowed the claim of Long Term Capital Loss. Revisionary order passed u/s.263 by the ld. CIT cancelling the assessment order is not sustainable and hence is quashed. Thus, the appeal of the assessee is allowed.
Issues Involved:
1. Legitimacy of the order passed by the Commissioner of Income Tax under Section 263 of the Income Tax Act. 2. Examination of the assessment order passed by the Assessing Officer under Section 143(3). 3. Verification and inquiry conducted by the Assessing Officer regarding cash deposits and capital gains. 4. Application of Explanation-2 to Section 263 concerning the conditions under which an order is deemed erroneous and prejudicial to the interest of revenue. Issue-wise Detailed Analysis: 1. Legitimacy of the Order Passed by the Commissioner of Income Tax under Section 263: The assessee challenged the order passed by the Commissioner of Income Tax (Intl. Tax)-3, New Delhi, dated 31.01.2019, under Section 263 of the Income Tax Act, which set aside the assessment order dated 07.12.2016. The Commissioner held that the assessment order was erroneous and prejudicial to the interest of revenue. The assessee argued that the Commissioner failed to properly consider and appreciate the submissions made in response to the show cause notice dated 03.10.2018. 2. Examination of the Assessment Order Passed by the Assessing Officer under Section 143(3): The assessee, a non-resident American citizen, filed a return of income for the Assessment Year 2014-15, declaring taxable income and long-term capital gain loss. The case was selected for scrutiny to examine long-term capital gains and cash deposits in the bank account. The Assessing Officer accepted the return of income and long-term capital loss after examining all relevant documents, including the valuation report, sale deeds, and bank statements. 3. Verification and Inquiry Conducted by the Assessing Officer Regarding Cash Deposits and Capital Gains: The Commissioner of Income Tax observed that the Assessing Officer did not properly examine cash deposits amounting to ?1,07,81,000 in the assessee's bank account and failed to verify the source of these deposits. Additionally, the Commissioner noted that the Assessing Officer did not adequately scrutinize the capital loss reported by the assessee, which was based on an arbitrary valuation report. The Commissioner directed the Assessing Officer to conduct further verification and initiate proceedings under Section 201 for non-deduction of tax at source by purchasers of plots of land from the assessee. 4. Application of Explanation-2 to Section 263 Concerning the Conditions Under Which an Order is Deemed Erroneous and Prejudicial to the Interest of Revenue: The Tribunal emphasized that for an order to be deemed erroneous and prejudicial to the interest of revenue under Explanation-2 to Section 263, it must be passed without making inquiries or verification, without inquiring into the claim, or not in accordance with directions issued by the CBDT or higher courts. The Tribunal found that the Assessing Officer had conducted a reasonable and pragmatic inquiry, examining all relevant documents and verifying the source of cash deposits. The Tribunal held that the Commissioner failed to conduct any minimal inquiry himself to substantiate his claims and merely expressed an opinion that the inquiry by the Assessing Officer was inadequate. Conclusion: The Tribunal concluded that the revisionary order passed by the Commissioner under Section 263 was not sustainable. The Assessing Officer had conducted adequate inquiries and verification, and the assessee had discharged the onus of proving the source of cash deposits and the computation of long-term capital loss. The appeal of the assessee was allowed, and the order passed by the Commissioner was quashed. The Tribunal reiterated that setting aside an assessment order without conducting a minimal inquiry to establish the inadequacy of the inquiry by the Assessing Officer is not justified under Explanation-2 to Section 263.
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