2015 (12) TMI 450 - AT - Income Tax

Revision u/s.263 - as per CIT(A) instead of showing the entire sale proceeds the assessee has shown only 50% of the sale proceeds as his income which the AO failed to verify and the AO has not made proper enquiries regarding the cash received amounting from M/s. Krupa Land Ltd. against sale of land - Held that - We find from the various agreements and deeds of conveyance that the assessee has entered into transactions with different parties along with Shri Sunil Tukaram Patil either as a purchase or as a seller or as a consenting party. The name of the assessee as well as Shri Sunil Tukaram Patil appear in all the documents relating to land deals mentioned by the Ld.CIT. Therefore, it is incorrect to say that the entire profit should have been shown by the assessee instead of showing 50%. We find all these documents were filed before the AO who testchecked the same and has accepted the income shown by the assessee being 50% share in such land deals. Therefore, it cannot be said that there was non-application of mind and that the order is erroneous. The assessment order in this case was passed on 18-11-2011. The assessment record was called for during the course of hearing. It was revealed that the JCIT vide letter dated 02-02-2012 addressed to the AO has intimated for appropriate action u/s.147 in the case of the assessee on account of receipt of unaccounted income in cash in respect of land deals with M/s. Krupa Land Ltd. in A.Y. 2008-09 and 2009- 10. A copy of the letter addressed by the JCIT to the AO was filed by the Ld. Departmental Representative at the time of hearing which is placed on record. Therefore, at the time of passing of the assessment order the AO was not in possession of the letter received from JCIT (OSD) Central Circle-39, Mumbai. In absence of any such information at the time of completion of the assessment the AO could not have asked the assessee to explain the cash transactions, if any with M/s. Krupa Land Ltd. Therefore, on the basis of a subsequent letter addressed to the AO after completion of the assessment the Ld.CIT could not have assumed jurisdiction u/s.263 on this issue holding that the order of the AO is erroneous and prejudicial to the interest of the revenue. In view of the above, we are of the considered opinion that the Ld.CIT has wrongly assumed jurisdiction u/s.263 which is not correct under the facts and circumstances of the case. We therefore set aside the order passed u/s.263 by the Ld.CIT. - Decided in favour of assessee.

Summary

Issues involved:
1. Validity of the order passed under section 263 of the Income Tax Act for the Assessment Year 2009-10.
2. Correctness of the assessment regarding short term capital gains on land transactions and unaccounted cash received.

Detailed Analysis:
Issue 1: The appeal challenged the order passed under section 263 of the Income Tax Act for the Assessment Year 2009-10. The CIT set aside the assessment order and directed a fresh assessment denovo, citing errors in the original assessment. The assessee contended that the original assessment was correct and sought the restoration of the original order. The grounds of appeal included challenging the CIT's decision and requesting a stay on the recovery of disputed demand, a personal hearing, and any other suitable relief.

Issue 2: The dispute regarding short term capital gains on land transactions and unaccounted cash received was at the core of the case. The CIT found discrepancies in the assessee's reporting of capital gains from land sales and unreported cash receipts from a specific land deal. The CIT held that the AO's failure to verify these aspects rendered the assessment order erroneous and prejudicial to revenue. The assessee argued that the transactions were conducted jointly with another party, and the income was shared accordingly. The assessee denied receiving unaccounted cash from a particular entity. The Ld. Counsel for the assessee presented detailed arguments and relied on various legal precedents to support the contention that the original assessment was correct.

Judgment: The tribunal analyzed both issues meticulously. Regarding the first issue, it found that the assessee had correctly reported the income from land deals, which was duly accepted by the AO after verification. Therefore, the tribunal concluded that the original assessment was not erroneous on this aspect. Concerning the second issue, the tribunal noted that the AO was unaware of the unaccounted cash receipt at the time of the original assessment. As such, the CIT's decision to invoke section 263 based on subsequent information was deemed incorrect. Consequently, the tribunal set aside the CIT's order under section 263, thereby allowing the appeal filed by the assessee.

In conclusion, the tribunal upheld the original assessment and ruled in favor of the assessee, emphasizing the importance of proper verification and information availability at the time of assessment to avoid erroneous decisions under section 263 of the Income Tax Act.