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TMI Blog2014 (10) TMI 780X X X X Extracts X X X X X X X X Extracts X X X X ..... conjunction with an erroneous order passed by the AO - the assessment framed by the AO was not erroneous and prejudicial to the interests of revenue so as to attract the proceedings u/s. 263 – thus, the order of the CIT(A) is set aside and the assessment order is restored – Decided in favour of assessee. - I.T.A. No. 3003/Del/2014 - - - Dated:- 29-10-2014 - Shri H. S. Sidhu And Shri J. S. Reddy,JJ. For the Petitioner : Sh. Navin Gupta, Advocate For the Respondent : Sh. Vivek Wadekar, CIT(DR) ORDER Per H. S. Sidhu : JM This appeal by the assessee is directed against the order of the Ld. Commissioner of Income Tax, Hissar dated 21.3.2014 pertaining to assessment year 2009-10. 2. The grounds raised read as under:- I. That the order of the Ld. CIT is against law and facts. 2. That the Ld. CIT erred in invoking section 263 of the I.T. Act to the Ld. AO, although all the issues were duly considered by the Ld. AO u/s. 143(3) and directing him to make fresh assessment, although neither the order of the AO was erroneous nor prejudicial to the interest of revenue. 3. That the Ld. CIT erred in giving directions u/s. 263 of the Act to the Ld. AO, alth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that AO failed to disallow the deduction on account of interest paid. 2.5 The AO, in view of the above stated facts and circumstances, ought to have made proper inquiries .and made appropriate disallowances which he has not done. Failure on the part of the A.O., renders the assessment order is erroneous and prejudicial to the interest of revenue. 2.6 In response to the notice u/s 263(1) dated 31.01.2014, the assessee filed reply on 24.02.2014 re-iterating that Flat NO.23/4 and House at Bhiwani was inherited by him through Will of his father. It was also stated that office bearing NO.1012 has been purchased for business purposes. It has also been contended that proportionate disallowance of deduction claimed on account of interest on investment in Flat NO.23/3 and Plot at Kundli have already been considered by the A.O. at the time of finalization of assessment proceedings. As regards, investment made in house property at Model Town, Delhi amounting to ₹ 45,63,0001-, is stated that it was also considered by the A.O. and found that no interest bearing fund is invested for acquisition of this property. 2.7 The reply filed by the assessee has been considered. Assessee&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest @6% from Smt. Santosh Goyal duly credited in interest account and offered for tax, kindly refer to Audited Profit Loss Account which is on record, therefore, it could not be said that interest bearing funds are transferred in interest free advance alternatively assessed the same amount on interest @ 6% on which he is paying interest @ 10% PA., therefore, it is submitted that since the assessee had various interest unsecured loans aggregating to ₹ 25,74,740/-, and as such there is no loss to revenue and it could not be said that assessee diverted interest bearing funds to interest free advances. 3.2 The reply filed by the assessee has been considered and is not tenable. No doubt, the assessee has charged interest but it is lower than the rate paid on the loan raised by the assessee. As indicated in para 2.5 above, the capital and interest free funds available with the assessee have been exhausted against the investment in the assets mentioned, therein. Therefore, the funds used for advancing this loan is certainly interest bearing. The corresponding interest paid is not an allowable as deduction. The AO has not considered the issue and his failure in this regard has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come into the hands of assessee and same were offered for tax. It is specifically denied that assessee had paid ₹ 3.5 lacs (Rs. 2 Lacs + ₹ 1.5 lacs) to the purchasers for repair etc. as explained herein above assessee paid only ₹ 1.5 lacs out of sale consideration of ₹ 14 lacs to the purchasers and balance ₹ 12.5 lacs were considered to work out Long Term Capital Gains, .Computation of Income fortifies this contention of the assessee and same is on record. Since the enquiry was already made and a discussion on the issue after enquiry has been taken the matter may not be taken for action under S. 263 of the Act. 4.2) It is specifically incorrect that assessee claimed deduction of ₹ 3.5 lacs out of sale consideration rather he is claiming only ₹ 1.5 lacs, if this claim of assessee to reduce the sale consideration is not accepted by your goodself than telescopic adjustment in shape of cost of improvement of the flat may kindly be allowed to the assessee, which does not effects the L TCG worked out and assessed. For cost of acquisition copies of several last year's Balance Sheets were produced, which after due verification were returned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 26.08.2008. Therefore, genuineness of this payment is doubtful. In any case, this cannot be treated as expenses incurred wholly and exclusively in connection with the 'transfer'. The AO has failed to appreciate the facts and circumstances of the case in right legal perspective. Therefore, the AO has failed to calculate the LTCG correctly and this failure has resulted in passing an order which is erroneous and prejudicial to the interest of revenue to this extent. 5.1 In view of discussion in above paras, I am of the opinion that there is non- application of mind on part of the A.O. Also, the AO failed to apply correct provisions of the law. Therefore, assessment order is held as erroneous and prejudicial to the interest of revenue in respect of aforesaid issues. Had the consequent additions been made, there would have been substantial tax effect and thus the cause of the revenue has suffered. Further, the impugned order of the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue as it is in clear violation of the legal provisions contained in the Income Tax Act, 1961. Thus, the validity I sanctity of the legal provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of law and after giving anxious thought, in the light of the plain words used in section 263 of the Act. We draw support from the decision of the Hon ble Supreme Court rendered in the case of Malabar Industries Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) and other relevant cases, we are of the considered opinion that this is not a fit case for revising the assessment order. The reasons for our above conclusion are that the twin conditions, viz., the assessment order should be erroneous in so far as it is prejudicial to the interests of revenue do not co-exist in this case. The assessee had filed return of income for the year under consideration and had disclosed the same during the relevant year, alongwith entire requisite details. During the assessment proceedings, the ld. AO examined all the relevant evidences produced before him, either alongwith the return or during the assessment proceedings, and has accepted the gift as genuine. The AO called for the entire details. 11. The revisional power conferred on the Commissioner under this section is of wide amplitude. It enables the Commissioner to call for and examine the record of any proceeding under the Act. The revisional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not erroneous, cannot be revised. To put it in, still simpler words, it is mandatory for the Commissioner to revise an order that both the above conditions must co-exist . An order which is not erroneous cannot be revised even if it is prejudicial to the interest of the Revenue, and the vice-versa. 13. The subject of revision U/s 263 has been vastly examined and analysed by various Courts including that of Hon ble Apex Court. The revisional power conferred on the Commissioner vide S. 263 is of vide amplitude. It enables the Commissioner to call for and examine the records of any proceeding under the Act. It empowers the Commissioner to make or cause to be made such an enquiry as he deems necessary in order to find out if any order passed by Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue. The only limitation on his powers is that he must have some material(s) which would enable him to form a prima- facie opinion that the order passed by the Officer is erroneous in so far as it is prejudicial to the interest of the Revenue. Once he comes to the above conclusions on the basis of the material that the order of the A.O. is erroneou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less the view taken by the Assessing Officer is unsustainable under law. (vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the Commissioner, while exercising his power under section 263, is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) The Assessing Officer exercise quasi- judicial power vested in him and if he exercise such power in accordance with law and arrives at a conclusion, such conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. (viii) the Commissioner , before exercising his jurisdiction under section 263, must have material on record to arrive at a satisfaction. (ix) If the Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Officer allowed the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Assessing 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. 15. The above ratio of Hon ble Supreme Court s decision supports our finding given in this case. The Hon ble Kolkata Bench has further clarified and defined as to what does the expressions lack of enquiry by AO means while deciding the case of Sigma Search Lights Ltd. vs. ITO, 82 ITTJ 956 (ITAT Kolkata). The Hon ble Bench has observed as under :- Revision Erroneous and prejudicial order Lack of enquiry by AO An order may be brief or cryptic but if has been passed after conducting proper enquiries into the facts stated in the return, such an order cannot be held erroneous and prejudicial to the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of ITO, Gwalior vs. Smt. Urmila Gupta, which has confirmed the view taken by the Tribunal in ITA No. 04/Agr./2005 (Agra Bench) referred to above. 18. We further find that the Hon ble Third Member, being the Hon ble President has decided same and similar issue in the case of M/s. Pal Pal Electromechanical Ltd. vs. CIT Gwalior in ITA No. 52/Agr./2007 for A.Y. 2000-01 order dated 18.11.2008, where there was difference of opinion between the Hon ble Members constituting the Division Bench with regard to a Revision whether it was valid or not. The Hon ble Third Member held that the Revision was not valid because it was obligatory on the part of the CIT to show for the purpose of section 263 that the assessment was erroneous in so far as it is prejudicial to the interest of the Revenue. The facts of the above case are more or less on the same and similar lines as are the facts of the given case. Thus, we also draw support from the Third Member decision (supra). 19. In view of the foregoing observations, we are of the considered opinion that the assessment framed by the Assessing Officer was not erroneous and prejudicial to the interests of revenue so as to attract the proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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