2020 (2) TMI 1273 - AT - Income Tax

Revision u/s 263 - Use of word seems by the CIT while recording reasons - Limited scrutiny with reason Large Agricultural Income - profit on sale of agricultural land - HELD THAT - In the present case the Ld. Pr. CIT did not hold any enquiry into the matter and merely rejected the explanation of assessee without arriving at a definite finding that the assessment order is erroneous insofar as prejudicial to the interests of Revenue. The Hon ble Delhi High Court in the case of Director of Income Tax vs., Jyoti Foundation 2013 (7) TMI 483 - DELHI HIGH COURT held that Revisional Authority feeling a case of inadequate enquiry, must make enquiry to make out a case under section 263 of Income Tax Act. The assessee in the paper book has also filed an affidavit of Shri Satbir, in which he has confirmed that property was purchased in his name, but, he has not spent any consideration. The property was registered in his name by the Company now known as Limited Liability Partnership Firm and entire sale consideration have been received by the Assessee-Firm being the owner. This would also strengthen the case of the assessee that it was owner of the property in question. The assessee also produced sufficient evidence before A.O. to show that it has earned agricultural income out of the sale of agricultural land and agricultural produce. Since the case was selected for limited scrutiny only on these points and assessee furnished adequate explanation and evidences before the A.O, which have been examined by the A.O, therefore, it is not a case of even inadequate enquiry. In the show cause notice issued by the Ld. Pr. CIT, Dated 21.12.2018, at the end of Para No.6, after considering the facts of the case noted that it seems that the A.O. has not properly examined the documents filed and merely accepted the explanation of the assessee without even asking further queries on the above emanated issues. It seems that, Assessment order passed by the A.O. in this case is erroneous and prejudicial to the interests of the Revenue. The Ld. Pr. CIT has referred the word seems twice in para 6 of the above show cause notice. It would, therefore, show that even he was not sure whether it is a fit case of invoking jurisdiction under section 263 of the Income Tax Act, 1961. Therefore, it is not the case of no enquiry by the A.O. Therefore, Explanation-2 to Section 263 of the Income Tax Act, 1961, would also not be attracted in the case of the assessee. Since the A.O. examined this issue in detail on account of limited scrutiny assessment on exactly on the point in issue and decided the case accordingly, therefore, there was no justification for the Ld. Pr. CIT to invoke the jurisdiction under section 263. In this view of the matter, we set aside the impugned order of the Ld. Pr. CIT passed under section 263 of the Income Tax Act, 1961 and restore the assessment order. - Decided in favour of assessee.

Issues Involved:
1. Validity of the assessment order under section 143(3) of the Income Tax Act, 1961.
2. Ownership and sale of agricultural land.
3. Agricultural income from the sale of agricultural produce.
4. Invocation of jurisdiction under section 263 of the Income Tax Act, 1961 by the Principal Commissioner of Income Tax (Pr. CIT).

Detailed Analysis:

1. Validity of the Assessment Order under Section 143(3):
The Assessee-Firm filed its return of income declaring NIL income, which was selected for limited scrutiny due to "Large Agricultural Income." The Assessing Officer (A.O.) issued statutory notices and questionnaires, and the assessee provided necessary details and documents. The A.O. accepted the returned income and concluded the assessment under section 143(3) of the Income Tax Act, 1961.

2. Ownership and Sale of Agricultural Land:
The Pr. CIT found discrepancies in the ownership and sale of agricultural land. The land was sold by an individual, Shri Satbir, through Attorney Shri Vinod Kumar Garg, who was a partner in the Assessee-Firm. The sale deed indicated that Shri Satbir was the owner of the land, not the Assessee-Firm. The Pr. CIT concluded that the Assessee-Firm was neither the owner of the property nor the agricultural produce, making the assessment order erroneous and prejudicial to the interests of Revenue.

3. Agricultural Income from Sale of Agricultural Produce:
The Pr. CIT noted inconsistencies in the agricultural income reported by the Assessee-Firm. The sale of agricultural produce occurred after the land was sold, raising doubts about the legitimacy of the agricultural income claimed. The Pr. CIT emphasized that the A.O. did not verify these facts adequately.

4. Invocation of Jurisdiction under Section 263:
The Pr. CIT invoked section 263, stating that the A.O. failed to verify crucial facts, making the assessment order erroneous and prejudicial to the interests of Revenue. The Assessee argued that the land was shown in the balance sheet of the Company before its conversion to an LLP and that all legal proceedings were conducted by the Firm. The Assessee provided various documents, including sale deeds, balance sheets, and Government Land Records, to support their claim.

The Tribunal noted that the A.O. had issued statutory notices and the Assessee had responded with detailed explanations and documents. The Tribunal emphasized that the A.O. had examined the issues based on the material on record and accepted the Assessee's contention. The Tribunal held that it was not a case of inadequate enquiry or no enquiry, and the Pr. CIT should have conducted an enquiry before concluding that the assessment order was erroneous.

Judgment:
The Tribunal set aside the order of the Pr. CIT passed under section 263 of the Income Tax Act, 1961, and restored the assessment order. The Tribunal concluded that the A.O. had conducted a detailed examination of the issues and accepted the Assessee's explanations and documents. The Tribunal emphasized that the Pr. CIT did not conduct any enquiry and merely rejected the Assessee's explanations without arriving at a definite finding.

Conclusion:
Both appeals of the Assessee were allowed, and the orders of the Pr. CIT under section 263 were set aside, restoring the original assessment orders. The Tribunal reiterated that when the A.O. has taken a possible view based on the material on record, the Pr. CIT cannot invoke section 263 merely because they do not agree with the A.O.'s view.

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